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As Bitcoin Dips, There Is Extreme Profit Taking Underway

Bitcoin has pulled back $10,000 from highs set earlier in the year, and according to on-chain data, it is due to extreme profit taking from early investors and miners.

A price retracement of 40% seems impossible simply due to the fact that there are a lot of institutions that have bought Bitcoin above $20,000 and more at $30,000. Hence, if there are any small drops, they are being bought up by institutions quickly and effectively, with Grayscale being one of the major competitors.

In 26 days of January 2021, Grayscale has acquired a whopping 40,000 BTC, showing no signs of stopping. MicroStrategy is also doing something similar. With so much bullishness in the ecosystem, it doesn’t feel like Bitcoin will experience anything remotely close to a 40% drop.

Entrepreneur Alistair Milne summarized on Twitter Tuesday.

$1.31 billion flowed into Bitcoin and crypto investment products last week (a new record) as investors rushed to buy the dip

Another on-chain metric also shows that extreme profit taking is going on, but it isn’t just early buyers of the cryptocurrency who are well in profit, as noted by SPOR. The “Bitcoin Miners’ Position Index has reached an eight-year high. This means, according to CryptoQuant CEO Ki Young Ju, miners are moving an “unusual amount of Bitcoins lately.”

At current prices, miners are raking in anywhere between $20,000 and $13,000 per coin. And at such a high mark up, the temptation to sell is too strong to pass up, even despite the increase in demand for the cryptocurrency among high-wealth institutional investors.

Consider this fractal

year fractal by tradingview

The attached fractal highlights similarities between the 2019 cycle and the current cycle. Both the times, the price hit a local top and consolidated into a bearish descending triangle pattern, one which eventually led to a drop of 30%. Additionally, both the patterns were preceded by a parabolic explosion in price.

This time around, if the same breakout occurs, BTC’s price can hit its previous ATH at $20,000, a development that would be the perfect opportunity to retest a crucial level and begin a new cycle.

During past bull markets, Bitcoin retraced to as much as 37% on pullbacks, but the current decline has only tapped 31% max, trading at $31,986 at 5:57 PM GMT on Tuesday. One theory is that due to the participation of institutions during this cycle, pullbacks might not reach the same depths.

The history of Bitcoin shows that there are crashes that span anywhere between a simple 10%-20% drop to ones that range up t0 40%-70%.

If you have any questions and comments on Bitcoin today, use the form below to reply.

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source https://www.earnforex.com/commodities/as-bitcoin-dips-there-is-extreme-profit-taking-underway/