Three days ago, the entire crypto community was thrilling. The BTC/USD shot higher, distancing itself from the all-important 6000 base.
It is known by now that most miners break-even around the 6k mark on Bitcoin production. Anything below and they’ll need to tap reserves, new financial resources, or even to reinvest previous profits.
Judging by how quick the industry developed, chances are that any additional resources are already depleted. Hence, to satisfy the need for new cash, loans are needed.
However, until the 6k mark holds, everything goes smoothly. At the start of the week, the troubles with the Tether sent some cryptocurrencies higher against the dollar
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BTCUSD, for instance, rose almost to the 8k mark, while ETH/USD followed suit in a similar move. But the enthusiasm quickly faded. As it turned out, it was just a spike, probably someone squaring positions.
To square, a position means to close or liquidate a previous one. For instance, short-sellers from higher levels may have decided to book profits ahead of the 6k break, if it’ll ever come.
Squaring means going long, and, in a market already positioned on the long side as the crypto market is, it is similar with adding fuel to the fire.
Once that got through, the market quickly returned to the equilibrium just above the 6k level, with all eyes watching the horizontal base forming at that level.
Savvy traders remember a similar situation in the currency market. In January 2015, the entire FX community was in shock to find out the SNB (Swiss National Bank) dropped the 1.20 floor on the EUR/CHF pair.
Before the announcement, the pair formed a similar, horizontal base against the 1.20 level, just like the BTC/USD does against the all-important 6k level.
Will it break anytime soon? If yes, buckle your belts, as it’ll be a wild ride!