4 reasons Bitcoin is about to reclaim $38K putting all-time highs back in play

4 reasons Bitcoin is about to reclaim $38K putting all-time highs back in play

The price of Bitcoin (BTC) has risen above $38,000 after nearly 21 days below this level with the exception of the “Elon Musk” rally last week. There are four major factors that have coincided with the rebound in BTC price above this key level that could see Bitcoin have another go at $42,000.

These factors include the neutral Relative Strength Index (RSI) indicator, miner outflow decreasing, exchange netflow back into negative, and whale accumulation.

Whale accumulation coincides with negative exchange netflow

According to the pseudonymous cryptocurrency trader “Bitcoin Jack,” Bitcoin is demonstrating a “cup and handle” technical formation.

The technical formation typically indicates a trend reversal to the upside, which will be all but confirmed if Bitcoin follows up with a breakout in the short term.

The trader also emphasized the negative exchange net flow from exchanges, which shows signs of a Bitcoin accumulation phase. Citing data from CryptoQuant, the trader wrote:

“Bitcoin looks like a cup & handle – negative exchange net flow supports accumulation thesis New ATH around the corner for $BTC.”
4 reasons Bitcoin is about to reclaim $38K putting all-time highs back in play
Bitcoin exchange net flow. Source: CryptoQuant

Negative exchange net flow is an important metric because it shows that Bitcoin is moving out of exchanges.

High-net-worth investors prefer to move Bitcoin out of exchanges after they accumulate it for security and self-custody reasons. When BTC is moved to a non-custodial wallet, no one would have access to it other than the owner of the private keys.

Furthermore, analysts at Glassnode found that the number of whales holding Bitcoin has substantially increased so far this year. The combination of the negative net flow and the rise in whales show that the level of Bitcoin accumulation remains high. They wrote:

“The number of #Bitcoin whales (entities holding ≥ 1k $BTC) has seen an astounding increase. Since the beginning of the year, more than 200 new whale entities have appeared in the network –– data supporting the case that institutions are arriving.”

The RSI of Bitcoin is neutral

The RSI of Bitcoin across many time frames has returned to around 50, which is neutral. The RSI is an indicator that measures whether an asset is overbought or oversold.

If the RSI of Bitcoin exceeds 75, then it would be considered overbought; if it falls under 30, it is considered oversold.

Although Bitcoin remains close to the overbought area on the daily and weekly time frames, which are high time frames, the RSI stands between 45 and 60 across most low time frame charts. This suggests that Bitcoin has upside potential in the near term.

Miner outflow declines

Bitcoin miners are one of the major sources of selling pressure on BTC because they represent unmatched selling pressure.

As such, when miners begin selling the BTC they mine on exchanges, it can place significant pressure on the short-term price cycle of Bitcoin.

4 reasons Bitcoin is about to reclaim $38K putting all-time highs back in play
Bitcoin Miners’ Position Index. Source: CryptoQuant

According to data from CryptoQuant, the Miners’ Position Index (MPI) has been declining. At least in the foreseeable future, this means that the selling pressure coming from miners should be low.

Title: 4 reasons Bitcoin is about to reclaim $38K putting all-time highs back in play
Sourced From: cointelegraph.com/news/4-reasons-bitcoin-is-about-to-reclaim-38k-putting-all-time-highs-back-in-play
Published Date: Fri, 05 Feb 2021 12:41:27 +0000

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John Diaz

John Diaz– Stocks Market I am John Diaz and I’m passionate about business and finance news with over 11 years in the industry starting as a writer working my way up into senior positions. I am the driving force behind topmagazinewire.com with a vision to broaden the company’s readership throughout 2019. I am an editor and reporter of “Stocks Market” category.

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