The Bitcoin price has plunged nearly 34 percent from its high of $13,851, formed on June 26, but it is still up almost 158 percent year-to-date. Among the top 3 coins: ETH and XRP, Bitcoin’s performance are unmatchable. ETH is up only 58.56 percent YTD while Ripple’s XRP is down -12.93 percent. It is broadly recognized that the crypto winter has come to an end. But there is also another factor to take into consideration. This time the bull strength is largely for Bitcoin. This is mainly due to investors playing it safe. They do not want to be burnt like before when half of the space was covered by sham projects. Until this day, ETH is paying the price for this.
So, the question is which way is Bitcoin going to move given that the price has retraced more than one third from its recent high?
In traditional markets, when the price retraces 10% from its previous high, it usually means correction, and a 20 percent drop stipulates that we are in a bear market. But, this principle cannot be applied in crypto markets, where gains of 158 percent can be achieved in six months.
In order to analyze this and find out if bulls have lost control of the price, one can use the golden principle: look at the current price movement and compare it with the major moving averages. However, before I do that, it is also important to keep an eye on the OTC market and see what kind of orders there are and most importantly, who the buyers are.
During the peak, when the Bitcoin price touched $20,000, the premium for the Bitcoin price in the OTC market in Dubai was nearly 20% on top of the spot price. Sticking to the same measure, the premium for Bitcoin price in the OTC market in Dubai is between 10-15% now. These unofficial OTC dealers say that the reason for the premium being high is twofold. Firstly, there is a lot of optimism that something is about to come out of China in terms of Bitcoin regulation. That’s why Chinese buyers are happy to pay the premium. Secondly, it is the U.S. sanctions on various countries. This has brought more buyers in the market. Bullying behavior is clearly not working.
In fact, what needs serious attention are the governments that are suffering from the U.S. sanctions, such as Russia, Iran, North Korea and many more. Countries sanctioned by the U.S. can easily form a collation together and firepower the bitcoin mining process by using government electric power.
Now, going back to the technical analysis front, the price is in a constant battle with the 50-day moving average. It dropped below a few times recently. It was the first time since February, that the price closed below this average on Wednesday. Luckily for the bulls, the price crossed above this moving average yesterday. This back and forth movement shows that the bears are trying their best to push the Bitcoin price lower. In terms of support, I believe that the immediate support level is near the 100-day moving average which is trading at $7,364.
To conclude, it appears that the trading range is going to be between $7,364 to $14,000.