Over the last 24 hours, Bitcoin has seen a 23% rally from around $7,700 up to $9,500, but some are suggesting that a sharp correction could be around the corner
Spot exchanges have seen a large increase in volume, suggesting that there is renewed interest in the Bitcoin in the run-up to the halving in 13 days’ time.
Spots are platforms that do not offer leveraged trading, so increased volume on spots is usually a reflection of true market momentum and organic volume, however, some have suggested that the rally is disproportionate to the volume the market has seen.
JOE007, the prominent whale, is currently in a short trade that is at a $20 million dollar loss, entering the trade at $6,800. However, he has claimed he will stay put in the trade and wait for the market to turn in his favour, adding that he believes the current rally is fake as it does not have enough volume behind it.
By using macro market cycles, institutional investors seek to ‘trap’ retail investors with the fear of missing out for higher prices. Then, the price sees a sharp downward reversal, traders are liquidated and investors are able to buy back into the market at the new lower prices.
With the stock-to-flow model predicting $100,000 BTC by 2021, there is still plenty of opportunity for prices to fluctuate widely before next year and for Bitcoin to find new lows before the post-rally halving, in 2021, where a $100,000 valuation would break the all-time high record set in December 2017, when Bitcoin touched $20,000.
Could the Federal Reserve be partly responsible for the rally?
It is possible that the Federal Reserve’s decision last month to print more USD may have led to the increased volume in USDT. Tether is the most popular ‘stable coin’ which has its price pegged so one UDST is worth one USD.
Tether has one of the highest trading volumes on the crypto market and is used to reduce crypto holdings when needed, without having to exchange their holdings directly into actual USD and risk incurring tax or regulatory obligations.
However, JOE007 claims that he believes the actual use of USDT is to artificially inflate the price of Bitcoin to catch out new traders who buy-in at the top of green candles, as expressed in the tweet below.
If Joe is correct, then the upcoming selloff will wipe out a lot of traders who believed in the halving narrative and put their money into the market too early.
However, if he is wrong, Joe will be looking at a heavy loss and a major blow to his Bitcoin holdings, although it would be unlikely that Bitcoin never sees sub $7,000 dollar levels in the coming months.