Bitcoin (BTC) hit new two-month highs overnight on January 19 as suspicions about the validity of the market gained strength.
Concern over BTC liquidity “exploit”
Data from Cointelegraph Markets Pro and TradingView followed the BTC/USD pair as it consolidated above $21,000 after hitting $21,455 on Bitstamp.
That marked the pair’s highest point so far in 2023, the latest achievement in an indisputable bullish rally since the FTX debacle.
However, amid widespread mistrust, new warnings emerged as Bitcoin continued to defy predictions of a major reversal.
Analyzing the composition of the order book for the BTC/USD pair on the popular exchange, Binance, Material Indicators expressed surprise that those who were betting higher on Bitcoin had not yet withdrawn their support.
“We expected the betting block on February 13 to narrow, but it has brought more than double the liquidity to the area, which is bullish in the short term,” comment.
“In my opinion, this move seems choreographed. Not to fight it, but to limit exposure to manage risk.”
As Cointelegraph reported, whales were already in the crosshairs after massive buying took place last week.
“They are trying to attract more offers to take advantage of tight liquidity to the upside,” Material Indicators added.
“We could debate 100 different strategic reasons, but the net effect of large liquidity increases on bids is the same, at least until we retest local lows and they start to support.”
Another trader, Byzantine General, saw similarly unusual order book composition on the Deribit derivatives platform, with supports between $20,000 and $21,000.
“Deribit’s book seems interesting. It’s not usually so skewed to one side,” argued.
Bitcoin supply may struggle to find buyers
Meanwhile, doubts about the resilience of the rally spread beyond exchanges.
In a blog post published on analytics platform CryptoQuant on Jan. 16, the contributor, Phi Deltalytics, noted possible insufficient demand.
The reason, he said, was because BTC returned to exchanges to be sold, while stablecoin supplies dwindled.
“The recent rally in BTC has prompted market participants to deposit their cold-stored BTC to spot exchanges to take profits,” he comments.
“This increased selling pressure, coupled with declining stablecoin reserves for buying, will likely lead to a short-lived recovery rally. More demand is needed for the rally to be sustainable.”
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