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Even after becoming legal tender in El Salvador as a result of a parliamentary vote, bitcoin market sentiments remain biassed to the downward.
Bitcoin (BTC) saw its greatest daily performance on Wednesday since February 8, when Tesla revealed it had added $1.5 billion in BTC to its balance sheet.
The flagship cryptocurrency rose 11.98 percent to $37,573 after El Salvador President Nayib Bukele authorised it as official cash. In a nutshell, the Central American country will now be able to price products and services in Bitcoin and will even accept the cryptocurrency for tax payments.
Meanwhile, Bukele underlined that his administration will not tax Bitcoin investors on capital gains. He also stated that El Salvador will mine the cryptocurrency using excessive volcano energy, only weeks after Tesla CEO Elon Musk discontinued Bitcoin payment support due to the cryptocurrency’s worrying carbon impact.
I’ve just instructed the president of @LaGeoSV (our state-owned geothermal electric company), to put up a plan to offer facilities for #Bitcoin mining with very cheap, 100% clean, 100% renewable, 0 emissions energy from our volcanos 🌋
This is going to evolve fast! 🇸🇻 pic.twitter.com/1316DV4YwT
— Nayib Bukele 🇸🇻 (@nayibbukele) June 9, 2021
Bearish sentiment prevails
However, according to Lennard Neo, head of research at Stack Fund, a Singapore-based crypto investment fund, El Salvador’s benchmark move towards legitimising Bitcoin as an emerging store of value failed to inspire optimistic reactions from “smart” investors.
Even after the El Salvador news, the certified financial expert stated that the Bitcoin market’s upward feelings remained weak on Wednesday. The famous Dread & Greed Index indicated “extreme fear,” while smart money contracts of Bitcoin futures were nett short during the BTC/11.98 USD’s percent surge.
Trading activity also looked frail, noted Neo, adding:
“We should not expect a significant impact on Bitcoin for a country with a GDP per capita less than 7% that of US, with its economy suffering the worst crash in decades last year.”
An analyst at Jarvis Labs, Ben Lilly, highlighted more examples of why bearish continuation is a serious danger, despite Bitcoin posting its best daily candles in months. On the same day the pair surged in spot markets, he flashed at the latest surge in BTCUSD Shorts, a dataset that counts the amount of margined short positions on the Bitfinex exchange.
A sharp increase of BTCUSD Shorts usually results in a drop in Bitcoin spot pricing. A collapsing BTCUSD Shorts, on the other hand, indicates an impending price rise.
Pablo, whales, etc.
Meanwhile, Lilly also brought back “Pablo” into his bearish analogy.
The analyst created the fictitious figure last year to represent a Bitcoin wallet owner who, according to him, had a significant part in dumping and pumping BTC/USD markets on many occasions, including the March 2020 meltdown.
Lilly cautioned that the unidentified dealer still had a Bitcoin hoard that he may sell later. He continued, saying:
“Pablo doesn’t look to be quite done. He has been making moves periodically since Monday and still has another round sitting in the chamber.”
The CVD indicator added to the Bitcoin market’s bearish bias. The indicator, shared by Lilly, implied a spike in Bitcoin selling orders having volumes between $100,000 and $10M.
Lily said that market movers are not behind the El Salvador Bitcoin price pump, noting that “they are letting price move about unencumbered.”
“Wherever it lands, it lands.”
Meanwhile, Bitcoin Dominance Index, a gauge to measure the benchmark cryptocurrency’s strength against its rival cryptos, surged from 41.28% to 44.23%.
The move uphill suggested that traders offloaded their altcoin positions to seek opportunities in the Bitcoin market, especially as the cryptocurrency became an official legal tender in El Salvador.