Bitcoin at a turning point: Can BTC replicate its August surge?

• BTC has crossed into a historic “shopping area,” indicating that a bounce-back is imminent.
• U.S. investors have started purchasing BTC in this region, while derivative traders are selling instead.

Bitcoin [BTC] has yet to fully recover following the market-wide sell-off. 

The event saw its price drop from $90,000, which it had held since the 15th of November, trading below it on the 24th of February, putting it at a loss of 17.47% in the past month.

Per AMBCrypto’s analysis, BTC could see a major bounce higher as certain sentiment aligns with a bullish narrative.

However, with the current selling pressure from the derivative market, the rally may not materialize. Here’s why.

U.S. investors accumulate Bitcoin as prices hit new level

Recent analysis from CryptoQuant shows that Bitcoin has entered a zone referred to as a historic shopping area 1 & 2 on the chart.

To trade in this area, Bitcoin needs to see a price drop of 15 to 20%—a decline it has recently recorded.

Source: CryptoQuant

These levels, as seen on the chart, are characterized as shopping areas because two major activities occur: the historical accumulation of BTC by market participants and investors capitalizing on the overreaction that led to a price drop.

At the time of writing, U.S. investors in the market were taking advantage of this drop and have begun accumulating the asset as the Coinbase Premium Index spikes to -0.053, trending up.

Typically, when this index is in the negative region, it indicates selling from U.S. investors. However, when the asset trends higher and heads toward crossing above 0, it signals that buying sentiment is gradually building up.

Source: CryptoQuant

If the index crosses above 0, another wave of BTC buying could occur, as investors at this level gain confidence that the asset is likely to rally based on its performance and other market sentiment.

On the chart, BTC could be on the edge of replicating the move that led to its price surge after a sharp decline in August, highlighted in the orange circle. Currently, a similar drop has occurred.

Following this pattern, the bullish move for BTC would be confirmed once the asset breaches the purple resistance line above it, potentially leading to a new all-time high.

Source: TradingView

While activity on-chain and the chart suggest a potential rally for Bitcoin, derivative traders are selling, which could hinder the anticipated upswing.

Derivative traders bet against BTC

Conviction in the derivative market is low, with funding rates dropping and selling volume seeing a major hike, suggesting these traders have impeded BTC’s major price move.

The current Bitcoin Funding Rate across cryptocurrency exchanges has seen a major drop since the 3rd of February decline, with a press time reading of -0.01.

A negative Funding Rate implies that sellers in the market are paying a premium to maintain their positions in anticipation of further price declines.

Source: CryptoQuant

With the Taker Buy/Sell Ratio, used to determine whether buying or selling volume is dominating, analysis shows that sellers in the market are in control, as their sell pressure outweighs buy pressure.

With key fundamental indicators turning bearish, BTC’s rally could face a minor setback. However, if other key indicators turn bullish, sellers in the derivative market could get liquidated as the asset moves higher.