Market recap 12/26/2020: Bitcoin hits ATH at $24.6k—what happens next?
The market recap is a brief market update posted several times throughout the week. It is data-driven and I look primarily into exchange heatmaps, whale inflows, OTC flows, and whale clusters. - Joseph Young
The price of Bitcoin hit a new all-time high at $24,681 on Binance.
Previous market recaps identified $24,200 as the major sell wall on Bitfinex and other major exchanges.
I said in an earlier tweet that the ideal trade is to wait for a convincing breakout above $24,200, rather than trying to catch bottoms, if not for $23,000.
Bitcoin surpassed $24,200, so it is clearly in an uptrend and the outlook is bullish.
But there are several concerns.
The futures funding rate - bearish
The funding rate is very high, which means the derivatives market is overheated.
The funding rate rises when there are more longs than shorts in the market. So when the funding rate, which averages at 0.01% rises to 0.1%, buyers have less incentive to long it.
The funding rate has come down a bit, but it’s still very high.
The major $24,200 exchange heatmap resistance breaks - bullish
The $24,200 level was a heavy sell area on Bitfinex and other major exchanges.
When Bitcoin broke this level and achieved a new all-time high, it meant the trend shifted to the upside.
Whale inflows still remain at historic highs - slightly bearish
Whale inflows are useful to gauge the selling pressure in the market.
Historically, when the All Exchanges Mean hit 2, it triggered corrections. It’s currently at 2.4.
So what do I expect?
I have been long Bitcoin since $18,560.
The reason why I have not closed the position is because I did not see any reason to do so.
I don’t see a big drop happening anytime soon. $23,000 has become a big support level.
During a bull market, the funding rate alone is not enough to cause a correction. If there are spot buys and institutional accumulation, then that can offset the high funding.
So, due to the high funding rate and high whale inflows, I expect Bitcoin to range between $24,600 and $23,600, eventually establishing $24,200 as support.
Exchange heatmaps also show $24.6k as a big sell area still, as shown below.
Source: Material Indicators
This will give enough time for the funding rates to reset and prepare another uptrend.
This is boring, but BTC is at a key level where it is likely to see a staircase rally, claiming one level after another.
I also think this is bad for large-cap altcoins in the interim.
When Bitcoin gets into this cycle, altcoins fall a lot harder than Bitcoin when BTC drops. But, when Bitcoin increases, altcoins lag behind.