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Why some traders are predicting Bitcoin will revisit $8,450 in the near-term

Why some traders are predicting Bitcoin will revisit $8,450 in the near-term

After a bearish weekly close for bitcoin in technical terms, traders have started to become more cautious on the short-term trend of BTC. Many analysts foresee a steep short-term pullback to the $8,000s.

Bitcoin rejecting $9,500 at weekly close could mean the resumption of a bearish trend

On Feb. 3, the weekly candle of bitcoin closed at $9,325 on BitMEX. While it tested the $9,500 multi-year resistance level several times before the weekly close, BTC struggled to see its momentum sustained.

Had the weekly candle closed above $9,500, it would have signaled an immediate breakout and an upsurge to higher resistance levels including $10,500 and $11,500.

However, the weekly candle of bitcoin closed with a fairly large wick below $9,500, leading to bearish short-term projections. In 2018, a rejection at $9,500 at a weekly level led to the retest of $6,000s, becoming a catalyst for BTC’s fall to the $3,000s in December 2018.

With the bitcoin block reward halving set to occur in about three months, even if the bearish trend resumes, it is not likely to see a similar price trend as it saw in 2018.

The cryptocurrency exchange market landscape is also significantly different from two years ago and direct comparisons may be far-fetched.

There are three key reasons why traders are generally anticipating a sizable pullback in the market:

  1. Total open interest on BitMEX and OKEx hit $1 billion,
  2. BTC rejected at a multi-year resistance level, and
  3. BTC is coming off a 50 percent upsurge.

Currently, as of February 4, the open interest on BitMEX is still over $1 billion. Although it does not warrant a pullback, it historically resulted in sharp pullbacks.

The positive funding rate on BitMEX, which means traders with long contracts have to pay short contract holders to balance the market out, could intensify a long squeeze if it occurs.

Prominent cryptocurrency trader Jacob Canfield said:

“Bitcoin is looking a bit scary for the bulls at the moment. The prolonged positive funding could be setting up for a pretty big long squeeze to the downside. If support breaks, it will most likely be a violent squeeze as longs cover their positions Watch for support reactions.”

Many technical signs point toward a retrace for BTC that would further stabilize the market. The pullback may end up fueling a larger upsurge for bitcoin in the medium-term.

Bullish scenario

One cryptocurrency trader known as Trader XO said that even if the bitcoin price drops to $7,600, it would present a highly bullish structure approaching halving. The trader said:

“If the local top is in & BTC prints a HL between 7.6k – 8.2k – then my bias would be bullish. Breaking below 7.6k’s more so the yearly open then quite likely BTC drops further lower, continuing its bearish market structure towards 5.8 – 6k.”

bitcoin price
Source: Trader XO Twitter

Traders are anticipating a minor correction to $8,000s primarily to alleviate pressure from the market and establish a stronger floor for the extended Bitcoin rally.

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Joseph Young
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Joseph Young

Analyst @ CryptoSlate

Joseph Young is a finance and tech journalist. He has worked with leading media and news agencies in the technology and finance industries, offering exclusive content, interviews, insights and analysis of cryptocurrencies, innovative and futuristic technologies.

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