Bitfinex "Bitcoin, Up but Market Cannot Be Trusted"

▲ Bitcoin (BTC), Dollar (USD)/ChatGPT generated image

Although Bitcoin (BTC) has surpassed $80,000 and risen above $81,000, warnings have emerged that the market structure is not yet solid enough to sustain a full-fledged rally. Analysts suggest that the combination of short-term holders selling at their break-even point and the burden of resistance levels could lead to increased downward pressure, contrary to the appearance of a rally.

CryptoPotato reported on May 6, citing a weekly report from cryptocurrency exchange Bitfinex, that Bitcoin's breakthrough of $80,000 does not signify the market's readiness for an uptrend. Bitfinex analysts diagnosed that Bitcoin is currently caught between bullish and bearish sentiments, conviction and caution, and under current market conditions, it is more likely to lean towards a decline than a rise.

Bitfinex viewed this rally as a potentially misleading ascent. Past Bitcoin rallies were sustained when supported by strong demand, but this time, despite improving demand, it is not uniform. While inflows into Bitcoin spot ETFs and continuous accumulation by institutions like Strategy were cited as positive factors, they were analyzed as not strong enough to absorb the accumulated supply overhead and confirm a sustained breakout.

Profit-taking by short-term holders was also identified as a variable hindering the uptrend. Bitfinex analysts stated, “The tendency for the incentive to close positions to overwhelm new demand and exhaust upward momentum whenever the price approaches the break-even point of the most sensitive holder group is a typical pattern observed in bear markets.” They explained that Bitcoin is currently in a vulnerable but constructive range where short-term holders are closing positions near their break-even point.

Bitfinex emphasized that Bitcoin needs strong spot-driven demand to continue its rally. However, they believe that strong demand will not easily materialize in the short term due to a fragmented macroeconomic environment, unclear liquidity tailwinds, and geopolitical risks in the Middle East. Bitcoin's breakout attempt stalled in the $78,000 to $79,000 resistance zone, and the cause was attributed to profit-taking by short-term holders rather than aggressive selling.

This resistance zone is a concentrated area where several indicators overlap, including the True Market Mean, short-term holder realized price, and weekly open. Bitfinex explained that these indicators act as both support and resistance levels. If Bitcoin fails to recover and hold the current resistance zone, the early $70,000s will remain the next key support zone, and downward momentum could continue. However, Bitfinex also left open the possibility of breaking through the current resistance line, given the continued inflows into Bitcoin spot ETFs and institutional accumulation.

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