Bitcoin price drop to $37K has analysts wary of calling a trend change

Bull market optimism returned to the cryptocurrency market on July 26 after Bitcoin (BTC) price rallied above the $40,000 level for the first time in over six weeks. Today’s rally to $40,581 was a continuation of the July 25 breakout which saw BTC price rocket to $48,110 at Binance af a short squeeze resulted in nearly $500 million in shorts being liquidated in just two minutes.

Data from Cointelegraph Markets Pro and TradingView shows that BTC spiked to an intraday high at $40,581 on Monday before pulling back to $37,500 as bulls look to flip this resistance zone back to support in preparation for a further move higher. While the move higher has the mark of a trend change and has prompted some analysts to proclaim the bull market is back on track, on-chain data and the perpetual funding rates do not fully concur with this point of view. Especially when one considers that the current breakout may have only been the result of a massive short squeeze.

According to Élie Le Rest, partner at digital asset management firm ExoAlpha, the recently denied rumor that Amazon would accept cryptocurrency payments have the potential to have a similar effect as the 2020 revelation from PayPal that it would integrate cryptocurrencies. Le Rest said that if the Amazon news turns out to be true, this “could be the catalyst to ignite a bull run in H2 of 2021.”

Caution is warranted against being overly bullish and data from Glassnode suggests that several bearish threats remain valid. When analyzing the directional bias of the futures markets, Glassnode found that “perpetual funding rates have continued to trade negative,” which “indicates the net bias remains short Bitcoin.” Bitcoin’s recovery above $40,000 also helped spark strong rallies in most altcoins.