A top blow-off remains possible, but the composition of the market has changed and 20% contractions are absorbed ‚aggressively‘
Bitcoin (BTC) is not far from a blow-off top and the resulting price implosion, but investors are „aggressively“ buying corrections.
On 8 January, noted analyst Filbfilb revealed to Cointelegraph that Bitcoin is on the verge of a corrective phase, given the pace of recent rises.
Filbfilb: I don’t think the blow-off top is far away
On Thursday, BTC/USD broke above $40,000 before a strong reversal traced a $2,200 correction in less than five minutes. Subsequently, after several attempts, the cryptocurrency managed to regain the level: at the time of writing it stands at $40,632.
BTC/USD Daily Chart (Bitstamp)
Filbfilb explained to Cointelegraph that a new style of buying was underpinning the series of new all-time highs. As with any market, however, vertical rises cannot last forever.
„Bitcoin continued to track smaller and smaller consolidations after failed sell-off attempts. This suggests the greater likelihood of a short-term finish. I don’t think the blow-off is far away, but no one can predict the high point it will reach,“ he pointed out.
„As for the correction, we all know today that 20% contractions are aggressively absorbed. Until this situation changes, the trend will be your friend.“
This style of automated trading points to a new class of investors entering the market with larger sums, replacing the manual exposure to amateur comparison that characterised 2017’s run to $20,000.
„There are still obvious signs of algorithms being used for accumulation, and these algorithms rarely care about price when their goal is to invest X$ in time period Y,“ Filbfilb added.
Growth in „uncharted territory
Meanwhile, at $40,000, a single Bitcoin surpassed the value of the average annual salary in the US for the first time.
Historical chart of the average wage in the US
Historical chart of the average wage in the US. Source: Federal Reserve/ Twitter
At the peak of $40,400 reached on Thursday, the main cryptocurrency’s gains in 2021 amounted to 42%, while the subsequent pullback caused a loss of around 9%. Although analysts continue to consider the possibility of further corrections, the mood on Friday was decidedly bullish.
„The whole bullish cycle we are going through will be far bigger than anyone expects,“ Cointelegraph Markets analyst Michaël van de Poppe announced to his followers on Twitter.
„Just like the peak of $20,000 was much higher than anyone expected in 2016/2017 for Bitcoin. That’s how markets work.“
In addition, statistician Willy Woo pointed to the lack of reference points on Bitcoin’s spot chart to calculate resistance levels, given the latest all-time high. That leaves only Fibonacci sequences:
„When there are no historical resistance levels, magic numbers in nature are all we have to determine supports and resistances. Bitcoin is plotting irrepressible price discovery in uncharted territory, literally.“