Classic short squeeze propels Bitcoin upward, but stiff resistance at $8,100

A lot can happen in one week in Bitcoin-Land. Seven days ago, analysts were mixed when assessing the fate of BTC for the week ahead. The world’s leading crypto had delivered a multi-week positive run, recovering nicely from what is now referred to as “Black Thursday” in mid-March. Analysts were espousing low momentum and even lower volume might set up a perfect storm for shorting the token.

The “smart money”, however, waited until open interest for shorts soared, and then on Thursday hit the markets running with large “Buy” orders. The result was a short squeeze that decimated short contracts on derivative exchanges like BitMEX, some $70 million by one estimate on this single exchange alone. Bitcoin had crept slowly upward from below $6,900 to just over $7,000, but then the “fix” was in. BTC shot up to $7,800 but has since settled back around $7,650 to take a breather. The SEC would clearly see this as just one more example for how easily this market can be manipulated.

BTC/USD Daily Chart courtesy of CoinDesk

Earlier in April, Bitcoin had tried valiantly on two occasions to break through its 50-Day Moving Average (See above), but to no avail. The lack of resolve is what prompted investors to go short, only to meet their demise when BTC forcefully broke through the clouds on its third try. Bitcoin has an uncanny habit of defying technical indicators and marching to the beat of its own drum, when all seems lost.

What about the new week to come?

With squeeze victims licking their wounds, no one is suggesting a major downward movement over the next few days. If there is a consensus, it is that Bitcoin will continue to grind slowly upwards, but it will encounter formidable resistance below the $8,100 level. Insiders claim there is a multitude of sell orders perched at $8,000 or just above, a blockade of sorts and that an assortment of technical factors are foreboding, as well. Longer-termed moving averages point downward. A key 61.8% Fibonacci Retracement level is also blocking the road, as is the top of a descending triangle.

CoinDesk canvassed a few insiders for their take on the previous week and the one ahead. Each crypto executive sees more demand in the pipeline, at least up to a point:

  • Daniel Masters, chairman of U.K.-based asset manager CoinShares: “Demand continues to be steady. You have to remember that for bitcoin to stay at these levels, you need inflows of new dollars matching supply of new coins. Analysis of wallets shows most tourists and speculators have sold, meaning we don’t expect many folks to sell into the halving except for miners who may be anticipating some pain around and are trying to lock in opex costs.”
  • Vishal Shah, an options trader and founder of exchange platform Alpha5: “It’s tough for me to digest that there’s new capital funneling in; it’s likely capital within the ecosystem sloshing around and targeting pain points. It feels pretty firm, with the next battle trench likely in the $7,850 – $8,000 region.”

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