The price of Bitcoin (BTC) hit a new all-time high of over $ 42,000 on January 8, up 9% in just three hours. At the time, there was a high premium on Coinbase which meant that US buyers pushed the market by aggressively accumulating BTC. But there is continued sales pressure from Asia, particularly South Korea.

Bitcoin corrected sharply after rising to USD 42,000, falling more than 7% in about eight hours. The sale coincided with significant whaling activity at major exchanges. Trading activity in the altcoin futures market also showed a similar trend. For example, on January 9, a whale unloaded a great deal of Ether (ETH) longs for Bitfinex, taking profits for the first time since March 12.

Whales have sold massive since the beginning of 2021. For example, when Bitcoin first crossed $ 40,000, big whales started selling BTC even as the price fell below $ 40,000. Within three hours, on January 7, the so-called “mega whales” on Binance were sold a total of four times, triggering extreme volatility.

Where is Bitcoin going now?

Currently, the Bitcoin market is essentially seeing a battle between whales making a profit on their positions and new buyers in the US market collecting BTC. As such, there has been constant extreme volatility since Bitcoin crossed USD 30,000. Due to the high inflow of capital into Bitcoin through Coinbase, BTC’s upward momentum is likely to continue for the foreseeable future.

The most important statistics to observe are the outflow of Bitcoin from Coinbase and the influx of stablecoin to major exchanges. When high net worth investors buy Bitcoin, they prefer to move the BTC out of centralized exchanges for security reasons. Therefore, a high outflow of Coinbase would mean a heavy accumulation of BTC in the United States.

When stablecoin inflows are high, it suggests that sidelined capital is returning to the Bitcoin market. Rather than cashing in on fiat currencies, such as the US dollar, cryptocurrency exchange traders, particularly derivatives traders, park their money in stablecoins. Therefore, when capital stored in stablecoins starts to flow back into cryptocurrencies, it typically suggests a bullish market structure.

Overall, market sentiment around Bitcoin remains positive, despite a rise in the past three months. Eric Wall, Arcane Research’s chief investment officer, said in a statement tweet that Bitcoin has the potential to see a “very extreme peak” this time around. This would mean that even if Bitcoin could overheat based on technical indicators in the short term, BTC could still have room for additional growth.

With the current price of around $ 40,000, Bitcoin’s market cap is estimated to be over $ 740 billion. Considering gold’s valuation of $ 9 trillion, this would put BTC’s market cap to about 8.2% of gold. Bitcoin’s bullish projections, such as the Winklevoss twins’ theorem, expect Bitcoin to overtake gold in the long run. Based on this assessment, some analysts say Bitcoin reaching 10% -20% of gold’s market cap is realistic.

Wall noted that Bitcoin would likely peak if there was apparently a lot of “foam” in the market. If there is an unnaturally high level of shopping fun around Bitcoin, the likelihood of a temporary Bitcoin top would increase. However, Wall said that given the unprecedented level of institutional interest in Bitcoin, the following top could be much higher than many imagine:

“The reason for this is that our current macroeconomic environment is unprecedented – our economy is inundated with money. In addition, we have just witnessed an incredible level of approval from the financial elite in favor of Bitcoin. And we know this time that the price is now set by institutions as well as by retailers. “

What are the main technical levels to look at?

According to researchers at Whalemap, a data analysis platform that tracks Bitcoin whales or high net worth investors, there are two major technical levels for Bitcoin in the near term. As long as BTC remains above USD 38,719 and USD 38,700, two major areas of whale clusters, the researchers said BTC’s bull trend will remain intact.

Bitcoin whale clusters. Source: Whalemap.io

Whale clusters form when whales collect Bitcoin at a certain price and don’t move their holdings afterward. Clusters are theoretically ideal areas of support because whales would strive to accumulate more at levels at which they previously bought BTC if the price of Bitcoin falls. The researchers noted: “Support for $ 39,719, invalidation under $ 38,700. The gap in support is between USD 39,719 and USD 32,180, so consolidation in the bear zone could bring us back to USD 32k. “

On January 9, the price of Bitcoin fell to USD 38,700, rebounding sharply at the support level. This indicates that some whales are gathering at this level and protecting it as a short term support area to keep the BTC rally moving.

Raoul Pal, CEO of Real Vision Group, warned of the “New Year’s Head Fake”. Pal said hedge funds are starting to talk about various risky assets at the beginning of the year. Then when many investors buy in, the market tends to correct towards the end of the first quarter. If this head-fake phenomenon coincides with a rising US dollar, Pal said he would be tempted to place S&P 500 wells. In the options market, puts are short contracts that allow investors to bet against an asset or an index.

Considering that Bitcoin and gold tend to move together, and a rising dollar could negatively affect both assets, a fake New Year’s head could trigger corrections in both the Bitcoin and gold markets. Whether this correction would be as brutal as the March crash remains uncertain, but as BTC is over-bought on higher timeframes, such as the weekly and monthly charts, the possibility of a deep correction nevertheless exists.