Bitcoin [BTC] has rallied nearly 11% over the past ten days. A month ago, it had faced rejection at $75k but has managed to climb back above this resistance and nearly tested $80k on the 22nd of April.
The rally resulted in numerous short liquidations, which fueled the move even higher. The biggest of these recent liquidations came on the 17th of April. On that day, $344 million in short positions were wiped out, and Bitcoin reached a local high of $78.3k, a level it has not breached since then.
Will BTC run into a wall of selling?
Crypto analyst Darkfost used the 30-day cumulative Funding Rate of Bitcoin on Binance to identify market insights. The 30-day sum showed a recent, sustained negative funding, which reflected a bearish market consensus.
Yet, the analyst noted, each time the majority of market participants believed in further losses, a market bottom had formed instead, and this could be the case for Bitcoin once again.
Moreover, the disbelief in the current rally could set up a market bottom, the analyst observed.
Crypto intelligence platform Alphractal agreed that the positioning was at an extreme. The Funding Rate was at its most negative since 2023. The Tactical Bull-Bear Sentiment Index was at lows that have historically marked cycle bottoms.
There were two possibilities. Either the bottom is in, and the price rallies beyond $80k and nukes more short positions. Alternatively, the bottom might not be in, and BTC might be due for another leg toward the $65k support.
The threat from profit-taking BTC holders
Over the past two months, Bitcoin bulls have labored to drive prices to $70k and are now targeting $80k. There have been strong retracement phases on the way, such as the one that came in the second half of March.
At that time, BTC retraced from $76k to $65k.
This could be due to the realized price of short- and long-term BTC whales. Another crypto analyst highlighted why the $80k was a critical inflection point.
In a post on X, the analyst explained that the $76k-$80k area was the cost basis of short-term whales and ETF investors. These were the two most “influential marginal buyer cohorts” in the market. Their sensitivity to price and their size mean that they can decide the next price leg for the crypto market. It is possible that they will buy more and keep prices rallying.
However, traders and investors should be prepared for the scenario where they take profits and the selling pressure sends BTC into a retracement once more.
Final Summary
- The Bitcoin rally in April has resulted in millions of dollars worth of short liquidations, and more could follow.
- The market was at a critical inflection point. The price approached the cost basis of short-term whales, which could trigger a wave of selling.