Bitcoin‘s BTC/USD recent bounce has analysts divided, with some cautious about a potential front-running scenario as the price nears a key resistance zone.
What Happened: Noted crypto analyst Capo highlighted this concern, urging investors to exercise caution.
He said Bitcoin is on the verge of reaching a critical liquidity zone between $74,000 and $75,000.
This anticipated movement carries the significant caveat of the possibility of a front-run due to diminishing volume, particularly in spot transactions that fail to align with the price’s upward trajectory.
Capo pointed out a concerning trend: despite Bitcoin’s approach towards the liquidity zone, the volume is not corroborating the price movement, with supply dynamics moving contrary to the price increase.
Furthermore, the rapid escalation in funding rates signals a predominance of futures contracts betting on further price increases against substantial resistance.
Also Read: Bitcoin Spot ETFs Stop Losing Streak: Is $100k Back On The Table?
This scenario indicated the market’s optimism may be largely fueled by speculative futures trading rather than genuine buying interest in spot markets.
“The volume is decreasing, especially spot volume is not matching the move, and the funding rates are increasing very quickly,” Capo tweeted, highlighting the speculative nature of the current uptick. “It seems like it’s mostly futures going long here against resistance.”
The cautionary stance adopted by Capo extends beyond the immediate price action, suggesting potential broader market implications if Bitcoin retraced to $60,000 or lower.
Such a downturn could precipitate a 20-30% drop in altcoin values, affecting a wide range of digital assets beyond Bitcoin.
Despite holding positions in Unizen ZCX/USD, SushiSwap SUSHI/USD and Axie Infinity AXS/USD, the analyst advised restraint in increasing market exposure without a significant deviation below the $60k mark, underscoring a strategy of cautious optimism in the volatile crypto market.
What’s Next: Topics like these are poised to take center stage at the upcoming Benzinga’s Future of Digital Assets event on Nov. 19. This conference will provide a platform for industry experts, analysts and investors to delve into the nuances of cryptocurrency markets, including the critical examination of trading patterns, liquidity concerns and the impact of futures markets on price movements.
Read Next: Crypto’s Mainstream Moment: London Stock Exchange’s $3 Trillion Bet On Bitcoin And Ether’s Future
Image created using artificial intelligence with Midjourney.
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Trade confidently with insights and alerts from analyst ratings, free reports and breaking news that affects the stocks you care about.
