Author: Yashu Gola

Bitcoin prices were relatively flat ahead of the New York opening bell Tuesday as traders waited for the Federal Reserve officials’ gathering for a two-day policy meeting.

The flagship cryptocurrency slumped 0.12 percent to $555,88.07 as of 1330 GMT. Earlier during the Asia-Pacific session, it was trading for as low as $53,221 after a mysterious $1 billion transfer to the Gemini exchange’s wallet panicked the market about a potentially massive sell-off.

Bitcoin also turned lower partly because of profit-taking sentiment after its price settled a new record high above $61,000 during the weekend session. The cryptocurrency’s downside move, coupled with the massive Gemini inflow, served as reminiscent of a similar price action after its price crossed $58,000 in late-February.

The Bitcoin Fractal

Back then, the BTC/USD exchange rate declined by as much as 26.30 percent, hitting $43,016 before rebounding higher in the later sessions towards $60,000. Additionally, the pair received support from its 50-day simple moving average (the blue wave in the chart below) that maintained its overall bullish bias despite the massive plunge.

The current price action appeared similar. Bitcoin found short-term support at its 20-day exponential moving average (20-DMA) on Tuesday, suggesting that a breakdown below the green wave could land its price near the 50-DMA.

The 50-DMA wave sits near $47,000. Generally, it has served as a strong support buffer during Bitcoin’s uptrend since March 2020. Therefore, it tends to act as a psychological rebound area should the price dip below $50,000 in the coming sessions.

Fed Meeting

The prospect of Bitcoin dumping lower depends on how the Federal Reserve meeting pans out by Wednesday. For the first time, the central bank officials are meeting against a stronger economic backdrop: the coronavirus cases are dropping, the vaccination rollout is accelerating, and US President Joe Biden’s $1.9 trillion stimulus plan is close to benefit Americans with up to $1,400 worth of direct payments.

Markets have taken notice. The yield on the benchmark US 10-year Treasury note has surged to its highest level in more than a year, raising concerns about premature financial policy tightening by the Fed. The central bank has maintained its benchmark rates near zero and continued its $120bn monthly asset purchasing program since March 2020.

Analysts do not expect a policy alteration but remain convinced that Fed would discuss its plans to taper down its expansionary policies against an improving economic outlook. Therefore, any sign of tightening from the central bank officials could pressure Bitcoin lower.

The cryptocurrency has surged 1,500 percent against loose monetary conditions.

Bitcoin expects to extend its prevailing bull run in the sessions ahead just as the US begins another vast spending program, including direct payments to its citizens who will receive up to $1,400 per person depending on their income and tax filing returns.

The flagship cryptocurrency’s prospect of hitting new highs rose after a Deutsche Bank poll of online brokerage users revealed that retail investors would use 35 percent of their stimulus benefits to investing in the stock market. Jim Reid, a research strategist at Deutsche Bank, confirmed that young, aggressively cohort investors would take riskier and overleveraged bets to magnify their potential gains and losses.

While the Deutsche survey did not include questions related to Bitcoin, the cryptocurrency’s likelihood of tailing the stock market gains against government stimulus packages all across 2020 raised its possibility of logging another bull run. Mike Novogratz, CEO of Galaxy Investment Partners, told CNBC in an interview that he anticipates retail investors to allocate a part of their stimulus checks to purchase Bitcoin.

“A lot of the stimulus checks are going to young people who want to buy bitcoin,” said Mr. Novogratz. “What happens on the weekend is retail gets excited you can tell because the cost of leverage goes way up on the weekend.”

Tackling Gemini FUD

Bitcoin rose to a new record high above $61,000 on Saturday, a day after President Joe Biden signed a $1.9 trillion stimulus package into law following its approval in Congress and Senate. Nevertheless, the cryptocurrency failed to extend its upside momentum at the beginning of this week amid panic selling led by the news that a whale had deposited $1 billion worth of BTC into his Gemini wallet.

As NewsBTC covered earlier, traders interpreted the large transfer as a sign that the whale would dump his bitcoins. That led to a selling frenzy in the market, causing the BTC/USD exchange rate to drop lower by as much as $4,404 at one point in time.

Bitcoin to ATH?

Some analysts later rubbished the Gemini news as misleading, with on-chain data specialist Willy Woo noting that the data that showed huge capital transfers between two bitcoin wallets were “bogus.” He instead blamed the fall on a Long Squeeze-like event.

“Markets selling off due to bogus data saying $1b of BTC flowing into Gemini,” he noted while providing a chart from Glassnode. “It’s the 2nd time it’s happened in the last 30 days. Chart: leverage positions getting liquidated as traders sell-off. Red dots showing the timing of the fake inflows. (28k and 18k BTC respectively).”

“The reported transactions were internal,” said Glassnode in a separate tweet. “Those are funds that were already on the exchange’s wallets and were simply transferred internally.”

Bitcoin rebounded by 2.31 percent following the clarification, with analysts anticipating that it would resume bull run to a new high.

“Drawing from the potential rollout of the $1.9 trillion stimulus package from the US, the coin is bound to surge above this ATH price levels in the coming weeks,” said Konstantin Anissimov, Executive Director at CEX.IO, told NewsBTC in an email statement.

“This bullish push will be based on the monetary inflation that will push both retail and institutional investors into the asset class,” he added.

Bitcoin fell more than 7 percent on Monday after a whale deposited 18,000 BTC into a Gemini wallet.

The flagship cryptocurrency dropped to an intraday low of $54,568 at 0940 UTC, down 7.47 percent into the European session. Its correction started on Sunday after the price reached a new record high above $61,000. Traders used the refreshed peak to secure their profits, leading the prices lower. Nonetheless, the sell-off accelerated after the said Gemini deposit.

A $1 Billion Bitcoin Sell-Order

Analysts across the cryptocurrency market interpreted the $1 billion transfer to the US exchange as a sign of a major dump ahead. CryptoQuant CEO Ki-Young Ju was quick to point out the correlation between higher Bitcoin inflow and its spot prices. He published a chart that showed a spike in Gemini’s Bitcoin inflow on February 21, which followed a downside correction of more than 26 percent.

Bitcoin painted two high-volumed red candles on its four-hour chart just as the Gemini news went viral across social media, illustrating panic selling among retail traders. On the whole, the cryptocurrency shed almost 10 percent, or about $6,000, of its valuation in the previous six hours.

Markets selling off due to bogus data saying $1b of BTC flowing into Gemini.

It’s the 2nd time it’s happened in the last 30 days.

Chart: leverage positions getting liquidated as traders sell off. Red dots showing the timing of the fake inflows. (28k and 18k BTC respectively) https://t.co/bQ8WvajyEJ pic.twitter.com/FtMPW2Oy03

— Willy Woo (@woonomic) March 15, 2021

Analysts interpret massive inflows into cryptocurrency exchanges as a bearish signal. Traders typically transfer Bitcoin to their exchange wallets because they want to trade them later to rival cryptocurrencies or fiat currency. Conversely, they withdraw bitcoins from their exchange addresses if they want to hold the cryptocurrency.

“This 18k BTC deposit is legit as it was a transaction between user deposit wallets and Gemini hot wallet,” noted Mr. Ju. “All Exchanges Inflow Mean is skyrocketed due to this deposit. Don’t overleverage if you’re in a long position.”

Around $1.41 billion worth of long entries got liquidated in the last four hours, according to “rekt” data provided by ByBt.com.

“Volatile Retest”

Technical chartists shifted their downside targets to the lower $50,000s following its sharp decline Monday.

An independent analyst noted that the BTC/USD exchange rate could fall towards $51,860, a level that served as resistance during the pair’s rebound from the year-to-date low near $43,000. That is partly because of BTC/USD’s drop below its local support area around $58,000 (the redded range in the chart below).

“The day is still young so [the] price could still resolve itself relative to this red boxed area and turn it into support,” the analyst added. “Technically, BTC is in the process of a volatile retest.”

Short-term, Bitcoin was testing its 50-day simple moving average wave as support.