Bitcoins [BTC] The rally stalled at $79.4K on Wednesday, April 22. There were and still are fears that a wave of profit-taking could lead to a significant price correction.
At the same time, investor interest in Bitcoin has increased, as the Coinbase Premium showed. Crypto analyst Darkfost used the volume-weighted version to reduce noise and give weight to the largest volumes when calculating the CP gap.
The analyst also assumed that Binance mainly reflects retail interest, while Coinbase Advanced sees professional and institutional users. As such, the positive volume-weighted premium indicated that the recent price increases were supported by stable demand.
The difficulty BTC faces in crossing $79K
In a previous report, AMBCrypto explored why resistance to round numbers of $80K was a big test for buyers. The short-term realized price or cost basis for Bitcoin was in the region of $76,000 to $80,000.
This finding, along with long-term holders’ supply underwater, highlighted why it would be difficult for bulls to initiate a sustained uptrend.
BTC has tested the true market average price, Joao Wedson claimed in a post on The bulls may need time to work their way past this area.
This could explain why the market has become increasingly bearishly positioned as the price of Bitcoin rose higher. And yet, historically, the extremes of negative financing rates have been associated with continued price increases, rather than a downturn in the trend.
This could be the result of forced short liquidations, which occur as buy orders in the market that drive derivatives prices higher in a self-reinforcing loop. These conditions describe a short squeeze, but on their own a short squeeze cannot create a sustainable uptrend.
Structural recovery, not market recovery
Analyst Axel Adler Jr showed that, on a short-term cost basis, the market has not yet regained a bullish structure. The metric indicates whether the price is higher or lower than the STH cost basis.
Selling pressure from heavily underwater short-term investors has eased significantly since February, but the transition to a bullish structure has not yet occurred. The cost basis for the short-term holder has fallen to $83,000, but the market price is still within striking distance.
According to the analyst, this discount value means it is better to read the current uptrend as a structural recovery and view the market through a bearish long-term lens, rather than betting on a bullish trend shift.
Final summary
- Disbelief in BTC’s rally to $79.4K has led to a surge in Open Interest and a high willingness to short the leading crypto.
- The $79,000 level is the “true market average price,” and bulls could have a hard time breaking this resistance level.