David Puell, an on-chain analyst and the creator of the Puell Multiple, believes two things could cause Bitcoin (BTC) to see a temporary peak this bike.

The analyst pinpointed the U.S. regime potentially taxing unrealized gains and the possible approval of a Bitcoin exchange-traded fund (ETF) could crusade BTC'south momentum to deadening downwards.

Why would an ETF have a negative impact on the short-term Bitcoin cost cycle?

The potential bear upon of the U.S. government imposing taxes on unrealized gains on the price of Bitcoin is quite clear.

At the terminate of each tax wheel, Bitcoin could see a heightened level of selling pressure, pushing its momentum down.

But the prospect of a Bitcoin ETF potentially having a negative effect on the price of Bitcoin is a relatively new concept.

Puell explains that the arbitrage play of taking advantage of the premium of the Grayscale Bitcoin Trust has been a major catalyst for BTC'southward recent rally.

Grayscale investment BTC holdings. Source: Bybt.com

The blessing of an ETF could dull downwards the inflow of majuscule into the Grayscale Bitcoin Trust, which so could ostensibly lower the demand for Bitcoin on paper. Puell said:

"BTC: IMO, there are ii plausible news items that would signal a bicycle summit for Bitcoin... 1. United states taxes unrealized gains: selling force per unit area on an annualized schedule. ii. ETF approving, incentivizing GBTC to trade at discount, unraveling the main arb play driving this bull."

These two events are unlikely to happen anytime in the nigh futurity. Puell emphasized that if they do happen, however, they would be fundamentally bearish for Bitcoin. He explained:

"Important note: Not saying they will happen tomorrow, but they are fundamentally surly if they were to occur. Bitcoin would need to overcome these obstacles to proceed its long-term path. I watch out for these."

Traders are cautious about BTC too, unless BTC breaks out of $35,000

Nevertheless, Bitcoin has a proficient chance of breaking out of the $35,000 resistance level in the short term. Information technology rose to as high as $34,880 on Jan. 25, demonstrating strong momentum in an overnight rally.

But, Bitcoin has struggled to interruption out of the critical $35,000 level, pulling back below $32,000 on Jan. 26.

Loma, a pseudonymous cryptocurrency trader, said that the failure to surpass $35,000 could make altcoins more compelling, especially if the BTC momentum dwindles. He noted:

"Higher up $35k or when $BTC taps 26-27k, this avi changes and nosotros get space bullish propaganda. Until then though, unless you lot're scalping, things look pretty shit. Longing ALTs towards the end of the week with $BTC short as a hedge is still the play."

As Cointelegraph reported, the weakness of Bitcoin in the by two weeks has led the ETH/BTC pair to break out. Large-cap altcoins, including Ether and DeFi tokens, accept performed particularly well against BTC so far this yr.

Bitcoin and Ether YTD performance. Source: Digital Avails Data

If Bitcoin continues to consolidate under $35,000 for now, altcoins will be in a good position to catch up in value against, particularly in their respective BTC pairs, in the starting time quarter of 2021.