Altcoins have entered a slight correction after Bitcoin’s relief rally lost steam and the price dropped below $35,000.
Grayscale products witnessed $3.3 billion in inflows in the fourth quarter of 2020, a large jump over the $1.05 billion seen in the preceding quarter. According to Grayscale, institutional investors accounted for 93% of the new investments.
The significance and magnitude of the investments can be gauged from the fact that in 20, Grayscale received $5.7 billion in investments, which is four times the cumulative inflow between 2013 and 2019
Data from Glassnode also shows that since July 2020, only about one-third of the 900 Bitcoin (BTC) mined each day have made their way to exchanges. During that period, Grayscale alone purchased about 1,200 Bitcoin every day. This shows how demand exceeded supply by a huge margin, resulting in the sharp rally which was ignited in the latter half of 2020.
However, after Bitcoin’s recent rise, larger inflows are needed to sustain the momentum. If this does not happen, select investors may be tempted to lock in their gains and that could start a correction with speculators and short-term traders rushing to the exit.
Let’s analyze the charts of the top-10 cryptocurrencies to determine the path of least resistance.
Bitcoin’s recovery hit a barrier at $40,0129 on Jan. 14 and the price has again turned down today. The bulls are currently attempting to defend the 20-day exponential moving average at $33,795.
The price action of the past few days has formed a symmetrical triangle, which generally acts as a continuation pattern. If the bulls can drive the price above the triangle, the uptrend could resume. The pattern target of the setup is $52,000.
On the other hand, if the bears sink the price below the triangle, the selling could intensify and the BTC/USD pair may drop to the 50-day simple moving average at $25,826. Even if the price falls to this level, the uptrend will not be broken.
Lower levels are likely to attract fresh buying from traders and that could result in a few days of consolidation where the bulls gradually accumulate before starting the next leg of the uptrend.
Ether’s (ETH) rebound off the 20-day EMA ($1,024) is facing resistance at $1,258.30. However, the long tail on today’s candlestick suggests that traders are buying on dips to the 20-day EMA.
The upsloping moving averages and the relative strength index (RSI) in the positive territory suggest that bulls are in command. If the buyers can propel the price above the $1,258.30 to $1,349.10 overhead resistance zone, the ETH/USD pair could rally to $1,462.
However, if the bulls fail to push the price above the overhead resistance zone, it may attract profit-booking from short-term traders and that could pull the price below the 20-day EMA. If that happens, the pair may drop to the critical support at $840.93.