Bitcoin is recovering, breaking the $56,000 resistance level

• Bitcoin price is breaking above the daily resistance level at $56,000, suggesting some modest signs of recovery after last week’s selloff.
• U.S. spot Bitcoin ETFs saw a light inflow of $28.60 million on Monday, snapping a streak of outflows that began on August 27.
• On-chain data shows a sign of recovery, with BTC’s long-short ratio above one and stablecoin holdings on exchanges increasing.

Bitcoin (BTC) is trading just above $57,000 on Tuesday after gaining nearly 4% on Monday, supported by light ETF inflows, increased whale buying activity during price dips, a long-short ratio of more than one and increasing holdings of stablecoins on exchanges.

Daily Market Reasons: Some Signs of Recovery

• U.S. spot Bitcoin ETFs saw a light inflow of $28.60 million on Monday, snapping their long outflow streak that began on Aug. 27, according to CoinGlass data. This is a sign of a slight improvement in market sentiment. However, it is relatively minor compared to the total Bitcoin reserves of $48.67 billion held by the 11 US spot Bitcoin ETFs and considering the significant outflows that Bitcoin ETFs have seen since inception of the month.

Bitcoin Spot ETF net flow chart

• Lookonchain data shows that a whale created a new wallet and withdrew 300 BTC worth $17.19 million from Binance on Monday.

Additionally, between September 1 and September 3, other whales bought 2,814 BTC worth $157.3 million from Binance, with an average price of $55,887. This indicates that large investors are buying to try to profit from recent BTC price declines.

• Furthermore, Coinglass’ Binance Bitcoin long-short ratio is 1.69, the highest since August 27, which means more traders are anticipating the asset’s price to rise.

Binance Bitcoin Long-Short Ratio Chart

• CryptoQuant data shows that stablecoin holdings are increasing on exchanges. When stablecoins enter exchanges, they are generally interpreted as funds waiting to buy, which could have positive effects on prices. However, increasing holdings does not necessarily mean that the price will increase. The value of stablecoin holdings on exchanges rose from $20.82 billion in early August to $24.99 billion on Monday, signaling investors are waiting to buy.

Stablecoins holding all stock charts

Technical Analysis: BTC Breaks Above $56,000

Bitcoin price retested and found support around the $54,000 level on Saturday, rising 5.5% over the next two days. It broke and closed above the daily resistance level of $56,022 on Monday. At the time of writing on Tuesday, it is trading slightly above $57,094.

If $56,022 continues to hold support, BTC could rise 4% from current trading levels to retest the 50% price retracement level at $59,529 (drawn from a high in late July to a low in early of August).

The Relative Strength Index (RSI) on the daily chart is hovering around its neutral level of 50, indicating indecision among investors. The Awesome Oscillator (AO) is still trading well below its neutral level of zero. Both indicators would need to trade above their respective neutral levels for any future rally to be supported.

BTC/USDT Daily Chart

This bullish thesis will be invalidated if Bitcoin price closes below the $54,000 support level. In this scenario, BTC could fall another 7% and retest the next daily support at $49,917.