The price of Bitcoin (BTC) surpassed $16,000 with strong momentum and has remained above the resistance-turned-support area since the initial breakout. Yet, traders are turning slightly cautious, anticipating a “reaccumulation” trend in the near term.
The term reaccumulation refers to investors gradually rebuying Bitcoin after a massive rally. This allows the dominant cryptocurrency to consolidate, rebuild momentum, and neutralized the overheated market.
There are several reasons to expect a reaccumulation trend or consolidation could occur in the foreseeable future. These factors are historical cycles, greed in the market, and high unrealized profits.
The 1-hour price chart of Bitcoin. Source: BTCUSD on TradingView.com
Historical Cycles Point Toward Bitcoin Reaccumulation in the $15K Region
Technical analysts, including John Bollinger, have said consolidation in the Bitcoin market is becoming increasingly likely.
Bitcoin recently exceeded the $16,000 resistance level for the first time in nearly three years. This also means that the $16,000 to $17,000 range remains an attractive area for sellers.
Albeit the hourly and daily charts for Bitcoin depict a rather stable upward movement, high time frame charts show a steep climb to the $16,000 level.
Both the weekly and monthly charts of Bitcoin are significantly above short-term moving averages (MAs), such as the 5-day, 10-day, and 20-day MAs. This could indicate that BTC is overbought at higher time frames.
A pseudonymous trader known as “Crypto Capo” said that reaccumulation between $14,500 and $16,000 is likely. “I expect reaccumulation range between 14500-16000,” the trader said.
Extreme Greed in the Bitcoin Market
According to Alternative’s Crypto Fear & Greed Index, the Bitcoin market is exhibiting signs of “extreme greed.”
Out of a scale of 100, with zero signifying fear and 100 showing greed, the Bitcoin market is currently at around 89.
Based on similar on-chain metrics and the historical technical structures of Bitcoin, traders expect volatility between $14,000 and $16,000.
A potential Bitcoin reaccumulation trend. Source: Edward Morra, XBTUSD on TradingView.com
Traders Are Sitting on Large Unrealized Profits
Atop the technical and fundamental factors, on-chain data shows that traders are generally sitting on large unrealized profits.
The term unrealized profits refer to the gains of traders that are yet to be realized by selling.
When traders begin to sell large unrealized profits, it could cause a profit-taking pullback to occur. Consequently, Bitcoin could start to consolidate, which might lead to reaccumulation.
There is a Variable in the Form of Exchange Reserve
One variable that could prevent a steep drop from occurring in the Bitcoin market is the decline in exchange reserves.
Traders typically deposit BTC into exchanges when they plan to sell their holdings. As such, when reserves decline, it demonstrates an intent to sell BTC from traders, and vice versa.
Vetle Lunde, an analyst at Arcane Research, noted that BTC deposits at major exchanges fell 19% since March. She said:
“The BTC deposits at major exchanges has fallen by more than 560,000 BTC (19%) since March 15th. The aggregated exchange balance has just fallen below 2.4 million BTC for the first time since August 2018.”