Bitcoin’s price has been extreme volatility in the past day. After the DJIA (Dow Jones Industrial Average) increased by above 800 points, Bitcoin declined in tandem with gold. During the five hours of hitting a four-day high of $15,840, Bitcoin fell by 6%.
The short-term pullback of the dominant cryptocurrency, which occurred for several hours, was helpful for Bitcoin for three key reasons:
- It neutralized the derivatives market, which is no longer overheated.
- It led to a healthy rejection of the $16,000 resistance level.
- It showed that even after a significant price decline, overall buyer demand remains unchanged.
On November 9, the dominant cryptocurrency witnessed a sharp decline from $15,840 to $14,805 after Pfizer published its positive coronavirus vaccine results. Significantly, the vaccine was tested nearly 44,000 individuals and showed 90% effectiveness. After the report by Pfizer, major U.S. stock market indices rallied by about 3%.
The highly expected development in the vaccine caused Bitcoin and gold to drop rapidly. Capital flew out of safe-haven assets in a short period. Moreover, gold posted an intraday 4.5% decline, which is unusual for its size asset.
Another essential thing to mention is that BTC initially started declining whale inflows into cryptocurrency exchange started to rise. It means that investors with high-new-worth, holding large amounts of Bitcoin were selling. After the dominant cryptocurrency rebounded up to $15,300 for six hours, whales bought again at a lower price. It’s likely that whales users a narrative of the vaccine-induced correction to sell at resistance and purchase at a lower price.
BTC has been fluctuating between $14,500 and $16,000
According to Bitcoin technical analyst Eric Thies, Bitcoin has essentially been fluctuating between two levels: the $16,000 resistance and $14,500 support. BTC rejected as it approached $16,000, showing that there are large sell orders present at the $16,000 resistance area. According to Thies, if the dominant cryptocurrency hit consolidation below $16,000, it would be profitable for buyers.
Moreover, the short-term decline of the largest cryptocurrency was also critical to reset the futures market. Before the fall, Bitcoin futures contracts’ funding rate across major exchanges was above the average 0.01%. This fact emphasized that the majority of the market was heavily longing or buying BTC. Significantly, after the correction happened, the funding rate recovered to 0.01%, indicating that the futures market is no longer overheated.
Moreover, the CEO of CryptoQuant, Ki-Young Ju, announced that BTC’s long-term prospect remains positive. According to him, the exchange inflow indicates that the BTC market is still in a strong buy zone. The exchange inflow suggests the amount of dominant cryptocurrency that traders and investors are transferring to exchange. Therefore, if the figure remains low, that means lower selling pressure on exchanges.