If Bitcoin seeing a minor correction or consolidation in the next few days could benefit select altcoins.
The supply and demand equation determines the price of an asset. In the past few months, the uptick in institutional demand for Bitcoin (BTC) has resulted in a strong bull run. This uptrend may continue until demand exceeds supply.
On-chain data shows two withdrawals of more than 12,000 Bitcoin each from Coinbase Pro this week, which is just short of the 28,000 Bitcoin mined in November. This suggests that demand from institutional investors remains intact even after Bitcoin’s recent rally because they are bullish in the long term.
Meanwhile, Mexico’s second richest man, Ricardo Salinas Pliego, said in an interview with Cointelegraph that Bitcoin has been his “best investment ever.” Salinas has about 10% of his liquid portfolio in Bitcoin and he is in no hurry to sell as he wants to “sit around for another five or ten years.”
The strong demand and HODLing by institutional investors has propelled Bitcoin’s market capitalization to above $500 billion for the first time. It has also boosted Bitcoin’s market dominance to above 70.5%, which suggests that the inflow of money has largely been into Bitcoin.
However, at some point, fresh money will stop flowing into Bitcoin and that could result in a correction or consolidation. Traders may then divert their attention to select altcoins, which could pick up momentum.
Let’s look at the charts of top-five cryptocurrencies that could rally in the next few days.
Bitcoin price broke above the $24,302.50 overhead resistance on Dec. 25 and resumed the uptrend. This breakout has a target objective of $28,664.04 and the price hit an intraday high at $28,419.94 today.
The BTC/USD pair’s incessant rise has sucked in traders who had been waiting on the sidelines for a dip to enter. Institutional investors, momentum traders, and speculators have also joined the party that has kept the uptrend intact.
However, the current pace of rise is not sustainable. The long wick on today’s candlestick suggests profit booking at higher levels. Even if the uptrend continues, the pair may again face selling near the $30,000 mark.
If the uptrend stalls, the short-term traders may rush to the exit and that could pull the price back to the 20-day exponential moving average ($22,613). If this support holds, the pair could again attempt to resume the uptrend.
On the other hand, a break below the 20-day EMA could drag the price to the critical support at $20,000. Therefore, traders may avoid chasing prices higher.
The 4-hour chart shows the formation of a Doji candlestick pattern, which suggests indecision among the bulls and the bears. Although the uncertainty resolved to the downside, the long tail on the candlestick shows buying at lower levels. This suggests traders are purchasing on every minor dip.
However, if the bulls fail to propel the price above $28,419.94, the selling may continue and that could pull the price down to the 20-EMA at $25,446. The overbought levels on the relative strength index also point to a possible correction.
A break below the 20-EMA and the support at $24,302.50 will suggest that the momentum has weakened.