BTC’s Hard Rally Stalls as Resistance at $25K Is Tested
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| By Marija Matic |
Even though it has just started, this week is already an eventful one …
The Chinese crypto narrative popped up again: The country’s hard line against cryptos seems to be softening in Hong Kong as it is about to allow institutional and retail crypto trading in June.
As a gateway for Chinese capital, this is considered bullish for the broader crypto market.
Despite the news, the broad crypto market decided to follow stocks today, which are in red, amid a stronger performance by the U.S. Dollar Index.
The cherry on top is Bitcoin’s (BTC, Tech/Adoption Grade “A-”) performance. After rallying quite hard last week — without any news, macro data or stock correlation propelling it higher, interestingly — it came to a halt just under $25,000 today.
But don’t let the pause fool you. This is quite healthy and could be attributed as a sign of an early bull market.
Especially considering the demand for the space in Bitcoin’s blocks is rising, sending the transaction count to its highest levels in two years.
Why? The non-fungible token wars have come to the Bitcoin blockchain!
Yup, you heard it right: These popular assets have mostly been minted on the Ethereum (ETH, Tech/Adoption Grade “B”) blockchain up to now. But even though Bitcoin has not been envisioned as a smart-contract blockchain, it can now have some sort of NFTs built on it.
The protocol that enabled them is called Ordinals. It offers users the option to inscribe references to digital art into small transactions on the Bitcoin blockchain, essentially creating Bitcoin-based NFTs.
Is this good for Bitcoin? That answer demands a bit more nuance. In short, I don’t think so, but let’s break that down.
This is great news for Bitcoin miners, as they earn more from increased block demand. It’s also good for those who stand to earn money on those NFTs, which are called inscriptions on the Bitcoin blockchain.
However, it’s not great news for regular users of Bitcoin. This is because these inscriptions can spam the network … which in turn raises transaction fees.
And I am not the only one who isn’t ecstatic about this development. Bitcoin’s purist developers have criticized the founder for “spamming” the network with unnecessary things and potentially making some BTC non-fungible in the process.
The market, however, doesn't care. The inscriptions continue to be created and traded ecstatically: Over 153,000 NFTs have been created so far on the Bitcoin blockchain.
But this is not the only NFT drama.
Last week, NFT Finance projects were the topic of several discussions as Blur NFT marketplace launched its own governance token.
To those unfamiliar with the NFT space, Blur is the largest competition to OpenSea, the largest secondary marketplace for NFTs. And Blur has even managed to overtake OpenSea in Ethereum trading volume lately.
When it launched in October 2022, Blur announced a zero-fee trading model. While this doesn’t benefit creators of NFTs, it is appealing to traders. As such, Blur enjoyed an aggressive expansion.
Now, users have flocked to Blur in expectation of airdrop rewards from the launch of its native token, BLUR.
But the issue of royalties is a very large, heavy battle fought between all NFT marketplaces. OpenSea, which was enforcing full royalties, has tried to disincentivize creators from listing on Blur by preventing collections from being able to earn royalties if they are listed on both.
In response, Blur has been encouraging all creators to reject OpenSea for its own platform.
The result so far is that OpenSea scrapped its enforcement policy and enabled zero-fee trading for a limited time.
But in this war between platforms, NFT creators are left as the biggest losers. The royalties they earn from secondary sales — a big benefit available to digital artists that traditional artists don’t have — are necessary if creators are to be incentivized to continue working on projects after the initial mint.
My colleague Joel Kruger speaks often to his NFT Wealth Builder Members about the importance of an active, live community supporting a project. That community will likely only hang around if the creators are active and invested on keeping projects alive.
So, to come full circle, it’s in the investors’ best interest to enable those royalties for creators. The battle between Blur and OpenSea have highlighted that too few understand this balance, which is why this is an important debate.
But that will have to be for another time. In the short term, all these developments have given even more strength to Bitcoin.
So, even though BTC has once again been rejected from $25,000, I don’t think that will be the case for long.
The last time it has managed to close a daily candle above $25,000 was in June 2022. However, the price action of the last few days has created a bullish ascending triangle on lower time frames, as can been seen on the chart:
Notable News, Notes & Tweets
- Hong Kong’s crypto hub, ambitions, wins quiet backing from Beijing.
- Tether (USDT) tightens its grip on the wobbling world of stablecoins.
- A British national who consulted North Korea on crypto has reportedly been detained in Moscow.
What’s Next
This kind of ascending triangle that BTC has built usually breaks upward. So, Bitcoin is in a good technical position.
If we don’t see additional negative headlines t and if DXY calms down a bit, Bitcoin has a very high chance to break that triangle to the upside.
After eating up $25,200 level, it can easily go toward $30,000, which would be psychologically significant.
Whatever happens, a larger move seems to be incoming. Hold tight.
Best,
Marija
