A surprising overnight rally on Monday pushed the Bitcoin price above $11,700.
As of around 2100 UTC, the BTC/USD exchange rate was trading at its intraday high of $11,736. The pair underwent a sharp downside correction as traders sold their holdings at local highs. Entering Tuesday, it was trading just shy of $11,500.
Nico, an independent market analyst, noted that the latest bearish move pointed to a weak rejection near $11,700-resistance. Saying that he is confident about the cryptocurrency’s bullish bias, Nico added that traders should – nevertheless – watch out for an extended pullback towards $11,100.
His reason was a missing candle on the Bitcoin Futures chart of the Chicago Mercantile Exchange. Traders believe that the so-called “gap” in the derivatives market propels the spot Bitcoin to fill it. Studies show that Bitcoin has filled 9 out of 10 of such missing candles in the past.
This psychological factor became the basis of Nico’s analysis.
Bullish Predictions for Bitcoin
The nature of Monday’s upside move was macroeconomic.
Bitcoin broke above its crucial technical resistances after taking cues from a tech-led stock market rally on Wall Street this Monday. The cryptocurrency remains erratically correlated with the S&P 500, as shown in the Skew chart below.
So it appears, the stock market pump reduced Bitcoin’s bearish bias. The roots of this analogy go way back to March 2020. Then, Bitcoin became an ideal scapegoat to cover investors’ losses in the S&P 500 index. It was sitting atop nearly 50 percent yearly profits YTD, which made it an ideal asset to offload for investors.
Even today, Bitcoin has rallied far better than traditional markets, which includes its top rival gold.
Traders assessed a bullish outcome for the S&P 500 in the coming days, primarily because of the third-quarter earnings season. They relied on optimistic outcomes for the firms during the reported rebound in the US economy in Q3. Excerpts from the Wall Street Journal report:
“With the economy continuing to slowly reopen, profits of the large U.S. companies in the flagship stock index are now projected to drop 20% from a year earlier in the third quarter. That is an improvement from the 25% decline anticipated at the end of June and the 32% drop reported for the second quarter.”
People also expected a clear pathway for the second coronavirus stimulus package. Despite hitting roadblocks, higher anticipations that Joe Biden would win the November 3 presidential election helped investors assess the possibility of a $2.3 trillion relief for American households and businesses.
That made the US stock market bullish in the running quarter. In turn, it left Bitcoin in a similar upside spell.
“Now that there are no further obstacles along the way, BTC and ETH are cleared to rise to $12,000 and $440, respectively,” Konstantin Anissimov, Executive Director at CEX.IO, told BlocDesk. “And if demand continues to increase, they may even be bound for new yearly highs. Such price behavior will indicate the restart of the crypto bull market.”
BTC/USD was trading at $11,494 at the time of this writing.