• Bitcoin has broken through $52,000, and this time it may be able to sustain the rally

  • For the second time in a month, Bitcoin has broken out of its trading range. After a season of decline, the first cryptocurrency by market cap is making its way back up from its yearly low of $29,900.

    At the time of writing, BTC is trading at $52,333, representing a 1.4 percent and a 7% profit on the daily and weekly charts, respectively. Bitcoin smashed the major resistance level of $52,000 after news broke that El Salvador had purchased its first Bitcoin from the country’s presidential office.

    The bulls appear to have regained control, and Bitcoin could potentially rise to its next resistance level of around $56,000 for the first time since May. If it manages to break through that resistance, the bulls may attempt a move into the $60,000 range.

    According to Bloomberg Intelligence Senior Commodity Strategist Mike McGlone, this could put BTC’s price on the “path of least resistance.” The price target for the first cryptocurrency by market cap is $100,000 by the end of 2021, and $5,000 for the second, Ethereum. McGlone observed:

    Following a painful correction, we believe the crypto market is more likely to resume its upward trajectory than to fall below the 2Q lows. The more enigmatic question is what could prevent Bitcoin and Ethereum from reaching new highs in 2H. Increasing demand and adoption are being met by dwindling supply.

    Glassnode’s report backs up the bullish thesis in the short term. The company reports a recovery in the mining sector after these operators were forced to relocate from China to other regions.

    According to the report, the recent increase in the crypto market has allowed BTC miners to secure profits. As a result, the Miner Net Position Change has “returned to a neutral zone.”

    Institutions are reinvesting in Bitcoin, and indicators point to higher profits.

    This Glassnode indicator has been used to assess the relationship between the number of coins accumulated or sold by miners and the Bitcoin price. As a result, the selling pressure that drove down BTC’s price in May and June appears to be gone.

    Furthermore, Glassnode observes a consistent increase in the size of BTC transactions. This has created a contrast between the current market cycle and the previous one, implying that institutions have remained on the network despite a 50% drop in the price of Bitcoin during May.

    As shown below, the transaction size has increased significantly, reaching a peak during that month. Glassnode also stated:

    This has largely subsided since July, with the current average transaction size ranging between $30k and $36k. Despite the recent correction, this represents a significant 370 percent increase over the 2019-20 period, reflecting continued and sticky institutional sized interest.

    Furthermore, according to the Spent Volume Age Band, a metric used to classify the proportion of daily coin volume by coin-age, investors have high levels of conviction to hold their Bitcoin.

    In other words, the number of BTC sold on the market and the length of time investors have held those coins. At the moment, the BTC traded belongs to the “younger coins,” while the “old coins” are dormant.

    Bitcoin could be impacted once more by a domino effect caused by the derivatives sector. As the price attempts to reclaim previous highs, speculators and short-term investors look to futures contracts to boost their profits.

    As a result, the funding rates for this product are rising. This metric is up 0.03 percent across exchange platforms, according to the research firm, and is at levels “seen prior to the May sell-off.” As a result, investors should remain cautious and keep an eye on Bitcoin futures. Glassnode also stated:

    The combination of positive funding rates and high open interest can be a useful indicator for assessing the risk of cascading long liquidations in the short term.

    What's your reaction?