Bitcoin presently trades at $34,480 after reaching highs of $35,868.
Bitcoin has been on a parabolic rally since September 2020. While a parabolic rally provides king-sized returns within a short time, it also increases the likelihood of a sharp reversal that may catch many traders off guard because, after such a strong upside move, the price could retrace to any point. Bitcoin’s latest plunge to $27,678 was ascribed to filling a large futures gap, marking the biggest drop since when it reached $20k.
An analyst gives a word of caution, stating ‘Shorting a rally because it is overbought on all time frames could be a losing proposition because, during a blowoff top, the price could continue to remain overbought for much longer than most traders expect, But traders who own long positions should use proper risk management principles to protect their paper profits and not get carried away by greed’
While also stating ‘it is difficult to predict the level where the rally may end because traders continue to chase prices higher due to FOMO’
Further stating that $40,000k could be the next point of call if the resistance on the approach to $37,000 is subdued.
Bitcoin daily volume on LMAX Digital. Courtesy: Arcane Research
Image Credit: Arcane Research, Shutterstock