Bitfinex: "Bitcoin Up, But Market Not Trusted"

▲ Bitcoin (BTC), Dollar (USD)/ChatGPT generated image

Bitcoin (BTC) has risen above $80,000 to over $81,000, but a warning has been issued that the market structure is not yet strong enough to sustain a full-fledged rally. Analysts suggest that the break-even selling by short-term holders combined with resistance levels could lead to greater downward pressure, contrary to the appearance of the rally.

Citing a weekly report from cryptocurrency exchange Bitfinex on May 6, CryptoPotato reported that Bitcoin's break above $80,000 does not signify the market's readiness for an uptrend. Bitfinex analysts diagnosed that Bitcoin is currently caught between bullish and bearish sentiments, confidence and caution, and under current market conditions, it is more likely to lean towards a decline rather than an ascent.

Bitfinex viewed this rally as a potentially misleading rise. While past Bitcoin rallies were sustained by strong demand, this time, despite improving demand, it is not uniform, according to their explanation. Inflows into Bitcoin spot ETFs and continuous accumulation by institutions like Strategy were cited as positive factors, but Bitfinex analyzed that they are not strong enough to absorb the overhead supply and confirm a sustained breakout.

Profit-taking by short-term holders was also identified as a variable hindering the upward trend. Bitfinex analysts stated, “The tendency for the incentive to close positions to overwhelm new demand and exhaust upward momentum whenever the price approaches the break-even point of the most sensitive holder group is a typical pattern seen in a bear market.” They explained that Bitcoin is currently in a vulnerable but constructive range where short-term holders are closing positions near their break-even point.

Bitfinex emphasized that strong spot-driven demand is needed for Bitcoin to continue its rally. However, they believe that strong demand will not easily materialize in the short term due to a fragmented macro environment, unclear liquidity tailwinds, and geopolitical risks in the Middle East. Bitcoin's attempts to break out halted at the $78,000 to $79,000 resistance zone, with profit-taking by short-term holders, rather than aggressive selling, cited as the reason.

This resistance zone is a dense area where several indicators overlap, including True Market Mean, short-term holder realized price, and weekly open. Bitfinex explained that these indicators act as both support and resistance levels. If Bitcoin fails to recover and hold the current resistance zone, the early $70,000s will remain the next key support zone, and downward momentum could continue. However, Bitfinex also left open the possibility of breaking through the current resistance line, given the ongoing inflows into Bitcoin spot ETFs and institutional accumulation.

*Disclaimer: This article is for investment reference only and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*