Crypto Enthusiasts, Big Investors Buy Recent Bitcoin Dip – Analysis, 25 Jan 2021
Last week, Bitcoin remained under pressure. On Friday, the price of digital gold even fell below the psychological level of USD 30,000.
Interestingly, this price drop coincided with the publication of a report from BitMEX Research suggesting that a critical flaw called "double spend" had occurred in the Bitcoin blockchain:
Double-spending is a potential flaw due to which one can spend the same digital token more than once. In other words, it is like counterfeiting money. Hence, it is a severe threat to any cryptocurrency, and if it happens, it may destroy the trust in the given cryptocurrency, and its price may even drop to 0.
However, almost immediately, the crypto community was able to dispel the claims about the double spend. Hashcash inventor Adam Back highlighted that there was no double-spending of Bitcoin:
The cryptocurrency enthusiasts explained that it had been just a so-called orphan block:
Moreover, Back indicated that he took advantage of the price dip and bought more Bitcoin:
Other Bitcoin bulls also availed themselves of the cryptocurrency price pullback. A well-known Bitcoin bull with Twitter handle @DocumentBitcoin (and an avatar people associate with Satoshi Nakamoto) made fun of the FUD about the double spend by saying the following:
Not only cryptocurrency enthusiasts bought the recent Bitcoin price dip, but big institutional investors as well. Michael Saylor, MicroStrategy founder and CEO, announced that they bought for their hedge fund approximately 314 Bitcoins at an average price of $31,808 for $10 million in cash:
Blackrock, the world's largest asset manager with almost $8 trillion under management, will invest in Bitcoin as well. The investment management company has authorized two of its funds to invest in Bitcoin futures, according to Business Insider.
After a relatively volatile week, the Monday market starts with a small price rebound. At the time of writing, according to Coin360.com, one Bitcoin costs €27,439.40 (+2.23%), one Ethereum – €1,415.53 (+7.17%), and one LINK – €20.43 (+1.98%):
Source: Coin360.com (Daily crypto market performance)
Now let us have a look at the price charts of the leading cryptocurrencies against the euro in the decisive time frames.
In the weekly chart (1W), this past week BTC/EUR formed a bearish candlestick, which has a local high below the previous one – a slightly bullish signal:
However, the local lows of the recent candlestick continue to increase, which is a slightly bullish signal. Therefore, we can conclude that in the weekly chart, the price of Bitcoin is just consolidating.
The 4-hour chart confirms the consolidation as well. BTC/EUR has started to form a Descending Triangle:
According to the technical analysis theory, a Descending Triangle is a trend continuation pattern. That is why many traders will wait for the price chart to exit the triangle. In case it leaves the triangle in the upward direction, an opportunity to open a long trade will appear.
In the weekly price chart (1W) of Ethereum, the bullish sentiment remains in place. After the Dragonfly Doji candlestick, a bullish candlestick formed that was able to continue the sequence of ascending local lows and renew the string of the ascending local highs:
Therefore, if the price of Ethereum continues to increase, we expect an Ascending Wedge to form in the 4-hour chart:
Theoretically, if an Ascending Wedge forms within an uptrend, it is viewed as a bullish technical pattern.
In our view, if the price of Ethereum drops to the lower line (support) of the wedge and it bounces off, then a favorable opportunity to open a long trade may appear.
Last week was a very successful one for Chainlink from a fundamental point of view. Grayscale, one of the leading crypto investing hedge funds with over $1 billion invested in Bitcoin, announced that it would start to buy six more cryptocurrencies – one of them is Chainlink:
The price of Chainlink reacted very positively to the news; it has surpassed the level of the previous all-time high and formed a new one:
The positive news accelerated the uptrend in the 4-hour chart of LINK/EUR. A new Ascending channel has formed:
We consider two possible scenarios. The first one is if LINK/EUR continues to move forward within the newly created channel. Under the second scenario, the pair returns to the old channel and resumes the uptrend within the old channel’s trajectory.
Nevertheless, both scenarios are bullish. That is why traders will continue to open long trades. How to trade an Ascending channel we already explained in one of our previous market analyses.
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The analysis is purely informational and does not constitute investment, financial, trading, or any other sort of advice and you should not treat any of Bitvalex's content as such. Bitvalex does not recommend that any cryptocurrency should be bought, sold, or held by you. You are solely responsible to conduct your own due diligence and consult an advisor before making any investment decisions.