Bitcoin (BTC) price has inspired optimism among traders after breaking consolidation within a daily supply zone. The next directinal bias, however, hinges on whether it will be able to break above the supplier congestion level it now faces.
Bitcoin, altcoins, stablecoins FAQs
Bitcoin is the largest cryptocurrency by market capitalization, a virtual currency designed to serve as money. This form of payment cannot be controlled by any one person, group, or entity, which eliminates the need for third-party participation during financial transactions.
Altcoins are any cryptocurrency apart from Bitcoin, but some also regard Ethereum as a non-altcoin because it is from these two cryptocurrencies that forking happens. If this is true, then Litecoin is the first altcoin, forked from the Bitcoin protocol and, therefore, an “improved” version of it.
Stablecoins are cryptocurrencies designed to have a stable price, with their value backed by a reserve of the asset it represents. To achieve this, the value of any one stablecoin is pegged to a commodity or financial instrument, such as the US Dollar (USD), with its supply regulated by an algorithm or demand. The main goal of stablecoins is to provide an on/off-ramp for investors willing to trade and invest in cryptocurrencies. Stablecoins also allow investors to store value since cryptocurrencies, in general, are subject to volatility.
Bitcoin dominance is the ratio of Bitcoin’s market capitalization to the total market capitalization of all cryptocurrencies combined. It provides a clear picture of Bitcoin’s interest among investors. A high BTC dominance typically happens before and during a bull run, in which investors resort to investing in relatively stable and high market capitalization cryptocurrency like Bitcoin. A drop in BTC dominance usually means that investors are moving their capital and/or profits to altcoins in a quest for higher returns, which usually triggers an explosion of altcoin rallies.
Eric Balchunas, an exchange-traded funds (ETF) specialist with Bloomberg, has indicated that besides China, Europe and Canada have joined the list of regions drawn to the US ETF market.
Next Wave of US ETF Bulls Coming From Abroad as Global Funds Lag – It isn’t just China investors, but Europe and Canada locals are also rushing to buy US-focused ETFs as flow % way higher than aum % for most regions.. awesome note today from @psarofagis & @RebeccaSin_SK pic.twitter.com/fsP1tfGTBI
— Eric Balchunas (@EricBalchunas) February 8, 2024
For China, the move came on the back of a constrained economy, with investors stampeding out of the country’s local market. This caused spikes in total volume of ETFs traded in China.
China so beat up and US at record highs and then you add on the premium, it becomes selling low and buying high on steroids, feels like it could end in tears for the local China investors.
— Eric Balchunas (@EricBalchunas) February 6, 2024
That process has caused China’s government to start taking measures to turn around the stock market and dissuade investors from leaving.
Like China, the case for Europe and Canada comes amid lagging global funds with European and Canadian locals now “rushing to buy US-focused ETFs as flow percentage outperform the percentage of assets under management (AUM) for most regions,” Balchunas notes.
The ETF specialist attributes this to weak rates seen among non-US ETFs. With greener pastures in the US, the fear of missing out (FOMO) plays out for investors outside the US.
After a break above $45,000, Bitcoin price is trading within the supply zone between $44,235 and $46,715. To confirm the continuation of the uptrend, the king of cryptocurrency must record a candlestick close above the midline of this order block at $45,451.
A decisive candlestick close above this level could see BTC extend the gains to the $48,000 blockade, or in highly ambitious cases, extend a neck higher to the $50,000 psychological level. Such a move would constitute a 10% climb above current levels.
The Relative Strength Index (RSI) is northbound, pointing to rising momentum. Its position above 50, coupled with the green histogram bars of the Awesome Oscillator (AO) and the Moving Average Convergence Divergence (MACD), accentuates the bullish thesis.
BTC/USDT 1-day chart
On the other hand, if profit booking takes place as traders look to cash in the gains made over the last couple of days, Bitcoin price could descend to lose the support offered by the 50-day Simple Moving Average (SMA) at $43,015. An extended fall could send BTC to the $43,750 support or, in a dire case, $41,880.
If these levels fail to hold, Bitcoin price could dip into the demand zone between $38,496 and $39,895. A slip below this order block could see BTC test the $37,800 level. For the bullish outlook to be invalidated, however, Bitcoin price must break below $30,000.