Bitcoin traded sideways on Thursday as buyers appeared to be exhausted near the $40,000 resistance level. The cryptocurrency is up about 23% over the past week, a gain driven by improving sentiment and short covering.
Some analysts expect bitcoin to remain range-bound as the current rally takes a breather.
“Our sense is that the market will keep looking to trade within this $30K-$40K range in the near term,” wrote QCP Capital in a Telegram chat. “Into Friday’s month-end expiry, we expect $40K-$42K to hold as the open interest peaks here.”
“Price levels to consider are the $40,000 psychological price level, and $44,000, which is the next resistance level BTC saw when Tesla announced they would accept BTC as payment back in February,” Jeffrey Wang, head of Americas at Amber Group, wrote in an email to CoinDesk.
In the bitcoin options market, “there is not much open interest between the $45,000 and $50,000 strikes for the August expiry,” Pankaj Balani, CEO of Delta Exchange, wrote in an email to CoinDesk. “We can see sharp moves here.”
Bitcoin is up about 35% year to date, double the S&P 500’s 17% gain over the same period. Both bitcoin and stocks are beating gold’s 5% loss year to date.
“Bitcoin open interest has also been picking up, breaking above its June highs and retesting support,” Stack Funds, a Singapore-based crypto asset management firm, wrote in a newsletter Thursday. (See chart below.)
“Our expectations for a retest towards the mid/low $20K region is less likely,” Stack Funds wrote. The firm mentioned that a clear breakout in open interest is required in order to signal further upside in bitcoin.
Although bitcoin remains in a secular bull market, the cryptocurrency has fallen by a minimum of 25% once in every calendar year since 2013, according to Panxora, a crypto investment firm.
“Often that fall averages more than 40% and this kind of drawdown makes cryptocurrency a challenging investment for those that have no way to manage this kind of volatility risk,” Panxora wrote on its website.
When managing risk, crypto investors can consider macro conditions such as economic growth and inflation, which tend to influence the prices of assets in both traditional and crypto markets.
“I think inflation fears will reemerge,” Gavin Smith, CEO of Panxora, said in an interview with CoinDesk. “And I think that will be the catalyst for a true move in the cryptocurrency, certainly bitcoin’s over the next six to nine months.
“From a longer-term perspective, I’m quite bullish on the environment, because what we’ve seen in the downturn is really people pulling away from the inflation narrative that we saw,” Smith said. “Personally, I think it’s too early to pull away from that.”
Smith said that Panxora and other institutions he spoke to are “entering the buy zone.”
“Even if they’re long-term bullish on bitcoin, what they do is they wait for these frequent sell-offs,” Smith said. “And then they use that to start accumulating their holdings, rather than chasing the market higher.”
Most digital assets on CoinDesk 20 ended up higher on Thursday.
Notable winners of 21:00 UTC (4:00 p.m. ET):
the graph (GRT) +5.05%
bitcoin cash (BCH) +4.38%
polkadot (DOT) +4.12%
chainlink (LINK) -2.33%
eos (EOS) -1.71%
algorand (ALGO) -1.01%