The price of Bitcoin is running behind $18,000, but the shorter consolidation phase of this rally leads some analysts to expect an explosion at the top.
The price of Bitcoin is advancing to $18,000 and enthusiastic traders are asking for the highest rated digital asset to surpass the record of 2017 at $19,763. Unless you’re a „bear“, setting a new historical record is great. But ideally, for a sustainable upswing to keep its pace, a ladder climb trend is more beneficial than a sudden rise.
In recent weeks, BTC has increased steadily, with no prolonged periods of consolidation or any major falls.
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BTC / USD daily chart. Source: TradingView.com
The chances of an explosion from the top are increasing
A broker with a pseudonym known as „Squeeze“ specified that the lack of consolidation in Bitcoin Up has been a trend since the end of October, and he hinted that this may empty the current high rally.
Although Bitcoin’s momentum has been strong, the price has also increased almost six times since the March break. When the BTC continues to rise without major corrections, the probability of a major setback increases. The trader wrote:
„The consolidations are getting shorter without much retraction. Blow-off top will be available soon. ”
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Bitcoin consolidation phases and rallies.
Peter Brandt, a popular veteran trader who also tracks the price of BTC, raised a similar point earlier this week. Brandt noted that in previous bullish rallies, BTC saw nine corrections to record highs.
In the recent uptrend, at least so far, Bitcoin has seen two important corrections. Compared to historical uptrends, BTC has seen considerably smaller corrections. He wrote:
„During Bitcoin’s 2015-2017 bullish market, there were 9 significant corrections with the following averages: a 37% drop from bullish to bearish. 14 weeks from an ATH to the next ATH. Since the low in early September, there have been two 10% corrections. ”
Since the drop on November 8, the price of Bitcoin has increased from US$ 14,344 to US$ 17,858 at Binance. In just 10 days, BTC saw a gain of almost 25% with a clear consolidation phase.
The uptrend pattern followed by consolidation and occasional corrections is the key to a prolonged uptrend, as it neutralizes the future market and decreases the chance of abrupt tops.
In technical analysis, a top blast refers to when the price of an asset falls suddenly and abruptly. For example, BTC saw a top explosion after the 2017 peak. In the following 52 days, BTC fell almost 70%.
Since the price of Bitcoin is close to $20,000, traders expect BTC to see a drop before it reaches $20,000. But there is a chance that this trade is overcrowded, as many analysts seem to anticipate a similar scenario.
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Futures financing rates are neutral
One variable that can make the high continue in the short term is the financing rate. At major futures exchanges, the BTC futures financing rate is hovering at 0.01%.
Futures exchanges in the cryptomorphic market use the so-called „financing“ mechanism to achieve balance among traders.
When most traders in the market yearn for Bitcoin, the funding rate becomes positive. If this happens, long contract holders or buyers have to encourage sellers and vice versa.
Major futures exchanges, such as Binance Futures, are showing a financing rate of 0.01%, which indicates that the current high is not overheated.
In the end, traders still expect Bitcoin to peak when the price approaches $18,000. Meanwhile, technical analysts have noted that BTC’s recent price cycle shows that each rise has been followed by shorter periods of consolidation.
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