- After yesterday’s Elon Musk pump, the Bitcoin price experienced a sharp correction, possibly also due to the outage of several major exchanges.
- Investors should keep an eye on the range between $34,000 and the low 32,000s.
Yesterday was undoubtedly the most exciting day of the year for Bitcoin investors yet. Elon Musk, the richest person in the world changed his Twitter bio to “#Bitcoin” and sent the Bitcoin rocket not to the moon, but still to USD 38,633 (+20%). After the Bitcoin price had tested the critical zone between USD 29,300 and 30,000 the days before, Musk thus virtually single-handedly ensured the reversal of the trend.
However, the joy among Bitcoin investors did not last very long. Hopes that Bitcoin could make another attempt to break through the all-time high of $42,000 thanks to Elon Musk quickly vanished. The pump was followed by a sharp correction to as low as $32,800.
As macro analyst Alex Kruger noted, the abrupt downtrend could also have been triggered by exchanges such as Binance and Coinbase. Both spot exchanges, as the world’s most popular, reported a huge rush of users after Musk changed his Twitter bio. This caused outages and trading halts to occur. The price crashed.
Quick $BTC post-mortem
#1 Run-up overnight on leverage triggered by Elon's Bio change, right after options expiry
#2 With $BTC at ~37,500, Coinbase and other exchanges "break", as can't handle inflows
#3 Price crashes
#4 Price bottoms when Bitmex-Coinbase basis turns negative
— Alex Krüger (@krugermacro) January 29, 2021
Nonetheless, Coin Corner CEO Danny Scott stated that the past week was a superb one for Bitcoin. In addition to the Elon Musk news, Rothschild Investments increased its Grayscale stake. Marathon Group bought $150 million worth of Bitcoin.
Moreover, it became public that US elite unis, such as Harvard and Yale, have been buying Bitcoin since 2019 and a publicly traded Chinese company acquired 26,000 ASICs. Last but not least, the founder of the $150 billion hedge fund Bridgewater Associates, Ray Dalio, called Bitcoin “a hell of an invention.”
#Bitcoin this week…
▪️Rothschild increase grayscale holdings
▪️Marathon buy $150mil of #Bitcoin
▪️Harvard, Yale, etc buy
▪️Public Chinese co The bought 26k ASICs
▪️@raydalio – one hell of an invention
▪️@elonmusk "In retrospect, it was inevitabe" – saved on blockchain forever
— Danny Scott (@CoinCornerDanny) January 29, 2021
What is the further outlook for the Bitcoin price?
Analysts agree that Bitcoin continues to trade at critical levels despite the Elon Musk pump. Technical analyst “Credible Crypto” noted via Twitter that the “sharp rejection” after the pump makes him cautious. He shared the chart below and stated that investors should keep an eye on the area between $34,000 and the low 32,000s:
The only level that matters for me right now is in GREEN. IF we lose this level we will likely make one more lower low.
Trader Michaël van de Poppe referred in his latest analysis to the cycles that Bitcoin traditionally goes through. Accordingly, the first two months of the year are traditionally weaker months for Bitcoin due to the tax season:
Despite the fact that #Bitcoin and #crypto are more bullish than ever, cycles repeat themselves. January was massive for majors and #Bitcoin, but regularly February is a corrective month. One final push upwards before the big altseason starts to occur from March onwards.
In its weekly on-chain analysis, IntoTheBlock, cited the In/Out of Money around Price (IOMAP) indicator. It points out that there is high support between $32,400 and $35,700, “where more than 1.3 million addresses have purchased 508,000 BTC to date.” In addition, the company analyzed:
If this range is broken, the next level to watch out for is between $31.2K to $32.39K, where 563k BTC had previously been bought. Overall, this highlights two strong support levels to hold before Bitcoin could be able to sustain above $31,000.
On the other hand, investors should expect the next area of significant resistance for Bitcoin to be at $38,300, “the last key level of support that could prevent Bitcoin from reaching its ATH again. If this level is broken, Bitcoin has a clear path up to 40.1k,” the analyst firm said.