Market Wrap: Bitcoin Expected to Pause Before Next Rally - CoinDesk

Bitcoin buyers are in profit-taking mode as the cryptocurrency tests the $40,000 resistance level. Sentiment has significantly improved over the past week, although some analysts think it’s time for a pause before another leg higher.

“BTC easily broke through $35K, but I think it will probably have a harder time going through $40K this time,” Justin Chuh, a senior trader at Wave Financial, wrote in an email to CoinDesk.

“Miners & sellers are coming in to cash out once more and buyers unable to push it higher after absorbing that hit,” Chuh wrote.

Sentiment can easily shift from bullish to bearish as bitcoin remains in a consolidation phase with strong overhead resistance.

“BTC was already rejected again by its 200-day moving average, just like in early June, but it should try again after a breather, and hopefully not crawling lower than $35K,” Chuh wrote. 

“If (and when) bitcoin does cross the 200-day, this will signal confidence in the market and demonstrate to many players that the bulls have regained control of the market,” Alexandra Clark, a trader at U.K.-based digital-asset broker GlobalBlock, wrote in an email to CoinDesk.

For now, trading activity is sharply higher compared with June. Short-dated call options were actively traded Wednesday morning as bitcoin approached $40,000, according to data from Skew.

Grayscale Bitcoin Trust (GBTC) shares have narrowed their discount relative to the underlying cryptocurrency held in the fund – possibly a sign that buyers are using the vehicle to bet on the recent recovery rally in digital-asset markets.

The GBTC shares traded at a discount of 6.6% to net asset value (NAV) on Tuesday, the smallest margin since June 22, based on data provided by the crypto derivatives research firm Skew. The discount had widened to 15% in mid-June. 

Some investors may have snapped up GBTC shares in hopes that the discount will evaporate with a bull revival in bitcoin. In that scenario, the buyers would reap any price gains on bitcoin while pocketing extra profit from a narrowing of the discount. (Grayscale Investments, which manages the trust, is a unit of Digital Currency Group, which also owns CoinDesk.)

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