- Bitcoin’s hashrate recovered after China mining ban
- Short squeeze occurred in Bitcoin futures markets from July 21-26, followed by extensive buying
- Miners not ready to sell off their holdings yet
- BTC/USD exchange rate could shoot up above $51,000 shortly
JAIPUR (Coinchapter.com) – Bitcoin erased bearish concerns by printing a 44% upside move from lows near $28,000 to $50,000 in a month. A flurry of bullish indicators fuelled the BTC/USD pair’s rebound.
In addition to Elon Musk’s tone reversal on accepting Bitcoin payments for Tesla, a nationwide mining ban in China spurred the benchmark cryptocurrency’s drawdown in May. As a result, Bitcoin miners fled the country in droves, searching for pro-crypto mining jurisdictions in other parts of the world.
The top cryptocurrency’s hash rate declined significantly amid mining gears going offline en-masse. From an all-time high of 197.6E recorded on May 13, Bitcoin’s hash rate crashed to 68E on June 28.
Hash rate numbers ticked up later from lows near 68E to 132.35E in August, as banished Chinese miners found support in Kazakhstan, Canada, and the US.
Weak Hands Selloff And Short Squeeze
The period from May 19 to July 20 was a phase of extreme fear. New market entrants who bought BTC/USD’s ascent to $65,000 triggered a massive sell-off. Dubbed ‘weak hands’ by IT Tech, a resident CryptoQuant analyst, these traders bought Bitcoin at a high price and sold it low, thereby incurring significant losses.
Nonetheless, ‘strong hands’ took charge soon, reverting the bearish sentiment and causing a short squeeze in the asset’s futures markets. Short squeezes are bullish events where asset prices shoot up sporadically, leading short sellers to close their positions to restrict losses.
Massive Bitcoin Buying Follows Short Squeeze
The short squeeze invited a tide of bullish response, especially from institutional investors. Those signed up with institutional platforms as Coinbase Pro engaged in massive accumulation, pushing BTC/USD spot rates to $47,000.
Overall, buyers (retail and institutional) looking to turn profits on their holdings over the long term withdrew their holdings from crypto exchanges resulting in an “outflow dominance trend” last seen during September – November 2020.
“#Bitcoin exchange flows have returned to a dominance of outflows through August as investors withdraw $BTC.”observed on-chain analytics platform Glassnode.
Miners Not Selling
While investors who bought the dip lapped up cheap coins, Bitcoin miners too held on to their BTC stashes despite the nationwide mining ban in China, data supplied by IT Tech shows.
Furthermore, the sell-off trend amongst miners witnessed a gradual decline indicating the Bitcoin minting lot’s intent for securing profits at higher prices.
Miner Position Index, the ratio of BTC leaving the miners’ wallets to its one-year moving average corroborated the same. The figure recently read -0.405. However, for miners to willingly sell their Bitcoin, it has to read two or higher.
BTC/USD Could Rally To $51,000 And Above
Adopting a bullish stance, IT Tech predicted a rally above $51,000 for the top cryptocurrency.
“Short term prediction -> retest price range between $48-49k and then goes up over $51k then generate new HL and HH -> 57k.”observed IT Tech
Bitcoin currently follows a sideways trend after topping out at $50,000 on August 20. The crypto asset remains restricted within the $46,000 – $50,000 range and is testing the bottom trendline of the Ascending Channel pattern. The relative strength index (RSI) is downtrend after reading overbought at 75 on July 30 (as opposed to rising prices).
In other words, the scenario is bearish. Bitcoin bulls need to attempt a retest of $54,700 (upper trendline of the Ascending Channel) to evict the stagnation. A close above $51,000 in the process would bring back bullish sentiment. IT Tech’s $57,000 price target would then become achievable on the back of higher supports and resistances.
The above bullish scenario stands to receive a significant boost from an impending golden cross setup formation in the short term. Golden crosses are bullish events where the 50-day moving average wave (50-day MA) crosses over the 200-day moving average wave (200-day MA).