The price of Bitcoin (BTC) has surpassed $40,000 on Wednesda, breaking above a key sell area for the first time in five days.
Traders expect a broader rally to come and a bullish market structure to form if Bitcoin continues to rise above $42,000 and Ether (ETH) reclaims $3,000.
$42,000 and $49,000 are key resistance levels
Bitcoin has been recovering over the past week due to three major factors.
First, Tesla CEO Elon Musk and MicroStrategy CEO Michael Saylor have been encouraging Bitcoin miners to use cleaner energy.
Musk and Saylor have gone further since, speaking with Bitcoin miners in the United States about reliable energy consumption.
Spoke with North American Bitcoin miners. They committed to publish current & planned renewable usage & to ask miners WW to do so. Potentially promising.
— Elon Musk (@elonmusk) May 24, 2021
Second, the Bitcoin futures market has reset to a large extent. According to data from Bybt.com, when BTC crashed to below $30,000, the futures market open interest dropped from $27 billion to $11 billion.
This means that the futures market is not overcrowded, which raises the probability of a more sustainable and gradual rally.
Third, Ether has been rising rapidly over the past few days, which also benefits Bitcoin and altcoins because ETH saw a deeper correction than BTC.
Major cryptocurrencies rebounding as a whole is improving the sentiment around Bitcoin, leading to the gradual recovery of the crypto market.
In the near term, traders say that $42,000 is the important short-term resistance area, and after that, $49,000 is the macro sell area.
A pseudonymous trader known as Pentoshi wrote:
“Many alts coming into some resistances +/- a 5%. We’ve gotten mean reversion as discussed during the nuke. However $BTC has been stuck. It started its LH trend a month ago. Would like to see Bitcoin pop + 42k or alts likely make their own LHs and dip again. Clock is ticking.”
What’s important to observe?
In the foreseeable future, the two key things to observe for Bitcoin traders are exchange outflows and the $42,000 level.
Ideally, if the $42,000 level holds and Bitcoin exchange outflows increase in tandem, that would mean that the confidence of investors in BTC and whales at above $42,000 is rising.
There are concerns that a “dead cat bounce” might form, which is a short-lasting recovery, but if BTC holds $42,000, the chance of a fakeout rally would substantially decrease.