Bitcoin’s (BTC) market capitalization was at $590 billion on Tuesday as the largest cryptocurrency traded at $30,399 with barely any changes over the last 24 hours. BTC was trading 3.4% below the $31,443 one-year high reached on Friday.
The rally had been fueled by multiple Bitcoin ETF filings by large financial services companies including Blackrock. The momentum has since faded away as investors came to terms with the fact that any approval by the United States Securities and Exchange Commission (SEC) could take months as the macroeconomic environment remained uncertain.
Yet in a recent report, CoinDesk Co-Managing Editor of Markets Omkar Godbole wrote as the market approaches Friday’s expiry of Bitcoin options contracts could fuel an additional increase in price, or send it spiraling in the immediate aftermath. Godbole said:
“If bitcoin builds momentum above $30,000 as expiry approaches, dealers will buy the cryptocurrency in the spot and futures markets. That, in turn, could lead to an exaggerated price rally, often called a gamma squeeze, or sling-shot effect. On the flip side, dealers will be forced to sell on a potential decline below $30,000.”
The significance of the support at $30,000 was reinforced by a number of analysts on Twitter. Jack Neureuter, a research analyst at Fidelity Investments, said in a Twitter post that this was an important level for the big crypto as it had provided “support twice amidst recent chaos and selling.”
The $28-30k range is an important support level for BTC. It’s represented support twice amidst recent chaos and selling. IMO this range could be a place BTC bounces around for some time until traditional risk assets dictate their next phase. pic.twitter.com/i4aCCv68G8
— Jack Neureuter (@j_neureuter) May 18, 2022
Similar views were shared by a Twitter user with the name JW who posted the following chart saying “Currently backtesting the anchored vwap from 30k on $BTC. This is an extremely important level to hold for continued upside. Folding back under would likely target low 20k.”
The significance of the $30,000 psychological level was also reinforced by on-chain metrics from the blockchain data analytics firm, IntoTheBlock. Its In/Out of the Money Around Price (IOMAP) model shows that Bitcoin sits on strong support around the $30,000 level.
According to the IOMAP chart below, this is within the $29,459 and $30,336 price range where approximately 626,710 BTC were previously bought by roughly 1.29 million addresses.
Bitcoin IOMAP Chart
Note that any attempt to pull BTC below this level would be met by aggressive buying from this cohort of investors who may want to increase their profits.
Bitcoin Price Coil Up Before A Lift Off
After setting a swing high at $31,443, BTC slightly dropped with the $30,000 psychological level acting as support. The flagship cryptocurrency has stayed above this level since then, suggesting that buyers are aggressively defending this level.
The IOMAP chart above shows that Bitcoin sits on relatively stronger support compared to the resistance it faces on the upside. This implies that the path with the least resistance is upward.
Therefore, the bellwether cryptocurrency could rise from the current levels with the first line of resistance emerging from Friday’s swing high. Later, the $32,000 psychological level could prove stubborn for the bulls.
Overcoming this level will confirm a clear bullish breakout for Bitcoin bringing $40,000 into the picture in the short-term. This would represent a 30% uptick from the current price.
BTC/USD Daily Chart
This positive outlook was supported by the up-facing Simple Moving Averages (SMAs) and the position of the Relative Strength Index (RSI) in the positive region. The price strength at 68 close to the overbought region suggested that there was more room for the upside.
Things could, however, go awry for BTC bulls if the price drops to produce a daily candlestick close below the $30,000 foot hold. If this happens, bears could pull Bitcoin first toward the 100-day SMA at $27,935 and later the 50-day SMA at $27,294.
Below that, Bitcoin could tag the ascending support line at $25,500 or drop further to revisit the 200-day SMA at $24,450. Traders could expect BTC bulls to take a breather here before making another attempt at recovery.
