On Monday, Bitcoin maintained its position close to a nine-month high, following its best week in four years. As traditional banking experiences turmoil, some investors are turning to digital assets. The largest cryptocurrency by market value experienced a 1.8% dip during Asian trading hours, dropping to $27,549 after reaching its highest point since June 12 on Sunday at $28,474.
Last week, Bitcoin’s value surged by 26%, and in just ten days, it increased by over 35% due to the ongoing banking sector turbulence. This turbulence started with the collapse of Silicon Valley Bank and culminated in UBS taking over Credit Suisse at a discounted rate over the weekend.
Markus Thielson, Head of Research and Strategy at Matrixport, a digital asset financial services firm based in Singapore, believes that bitcoin’s momentum is driven by liquidity, as it serves as an alternative liquidity vehicle.
Thielson predicts that bitcoin could reach $45,000 by the end of the year, as central bank liquidity finds its way into crypto assets, as it did during 2021 when bitcoin hit record highs.
On Sunday, the US Federal Reserve announced that it, along with other significant central banks, will increase the frequency of dollar supply operations into financial markets to enhance liquidity.
Noted trader Peter Brandt recently shared his observation of two significant unfilled gaps in Bitcoin’s chart on Twitter. He jokingly encouraged traders to short BTC, indicating a potential downward move for the digital asset in the near future. This view is rooted in the gaps theory in trading, which suggests that every gap in the market should eventually be filled.
Gaps are areas in a chart where an asset’s price experiences a sharp move up or down without any trading activity occurring between these levels. They often arise due to significant shifts in market sentiment or the release of significant news. As per the gaps theory, the market will eventually return to these unfilled areas and fill the gap, causing a reversal in price.
Bitcoin’s recent surge towards $27,000 has been fueled by a wave of liquidations that followed the collapse of SVB bank and an ensuing bank run. The traditional financial sector’s turmoil has prompted many investors to seek refuge in cryptocurrencies to protect their assets from the market crash resulting from banks’ failure.
However, Brandt’s observation of the unfilled gaps suggests that Bitcoin may not be invulnerable to a potential downward move. If the gaps theory holds, the market might return to these levels, resulting in a drop in Bitcoin’s price. It is crucial for traders and investors to monitor the market closely and remain aware of the potential implications of these gaps.