Cryptocurrency News

Bitcoin struggles below $ 40,000 as market enters ‘waiting and watching phase’


Price action for bitcoin (B T c) And the broader cryptocurrency market fell relatively low on May 27 as panicked traders are unsure of what will happen after the previous week’s market downturn. Leveraged traders eliminated Because BTC fell to $ 30,000 before its price rebound.

data from Coin Telegraph Market Pro And Trading view This shows that bitcoin prices have managed to bring higher highs and higher lows in the past one week, but bulls are facing stiff resistance in any meaningful endeavor. $ 40,000. Break above Bears protect a psychologically significant level.

BTC / USDT 4-Hour Chart. Source: Trading view

For many traders, the recent correction triggered flashbacks like the 2017 and 2018 market crash and PTSD of the upcoming two-year crypto winter, and this may be one reason the market seems uncertain at the moment.

Given that many traders are unsure of what might happen next for the price of bitcoin, it is wise to consider various bullish and bearish scenarios that may come into play and also take a look at the opinions of analysts in the sector .

Traders are cautious after the recent sell-off

According to David Lifchitz, ExoAlpha’s managing partner and chief investment officer, it is important to look closely at recent market events and review the catalysts leading to the current situation.

Lifchitz told Coinclag that “after the nearly uninterrupted bull market ran from $ 10,000 in October 2020 to an all-time high of $ 65,000 for BTC in mid-April 2021,” the market had several waves of gains ahead of “Great Delivering 2021” Saw “, in which the price of BTC fell by 54% to $ 30,000, while Ether (ETH) And altcoins were even more affected.

According to Lifchitz, the reform was successful in “reducing the amount of leverage prevailing in the ecosystem”, which could be seen as a healthy growth for the overall market, as it would “help build on a more stable basis. “

Estimated Leverage Ratio for Bitcoin. Source: Crypto quant

Lifchitz cautioned that although data showed that some early dip-buyers managed to pick up tokens near the lows, both volumes and futures open interest remained weak, “showing no urgency to reload.”

The monthly option expiration for bitcoin and ether is less than 24 hours away, and Lifchitz believes they stand in the way of “any meaningful move in a very short period”. He also suggested that “it would be difficult to convince burned investors to get back into the game right now” due to the lack of upside catalysts and the recent reminder that “prices don’t always go up”.

According to Lifechitz, this has put the market in a “wait-and-see phase”, with both trend followers and opposite investors needing to see “some momentum, either up or down” before engaging in the market.

Lifchitz said:

“The market definitely needs a catalyst, either upward or downward. A very long period without a catalyst can cause fatigue to investors who decide to cash out and look for other pastures.” , Which will act as gravity on the crypto that will trigger downward momentum. The next few days / weeks will tell a lot about what’s going to happen next. “

Bullish indicators abound

While the average crypto trader is currently in a stable state and is waiting for the next major market move to signal what BTC can do next, on-chain data indicates rapid moves from big players who have made a purchase. Took full advantage of the recent decline.

According to Micah Spruill, the managing partner and chief investment officer of S2F Capital, most of the sales at recent lows “have been from new entrants in the market” who are “selling at a loss and ending up at this point.”

In a conversation with Cointegraph, Spruill pointed to the volume of net transfers of BTC, indicating that after the recession between May 17 and 20, “large amounts have been sent to the USDC and USDT exchanges (BTC, ETH, To buy etc.) and pull them out for long-term storage. “

BTC net transfer volume to / from all exchanges. Source: Glasnode

Further analysis suggests that retail wallets between 0.1 and 1 BTC, as well as whale wallets between 1,000 and 10,000 BTC, are accumulating at these levels in preparation for an overall increase.

Another bullish indicator outlined by Spruill is the net growth of entities, which are “coming back to previous levels” and may indicate that “the bull market is back in full force” if this trend continues over the next few weeks And the metric resumes its high level.

Net growth of entities for bitcoin. Source: GlassNode

Overall, Spruill sees a positive move for BTC in the future, although timing is questionable due to several factors.

Spruill said:

“I think there is a possibility that we may spend an extended period (months) between the $ 30,000 to $ 42,000 level as the market digests recent events and we tolerate a mid-cycle re-accumulation period Alternatively, it is possible that we have a COVID-like recovery from which we see that bitcoin will soon break out of this range and recover much faster than others.

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointegraph. Every investment and business move involves risk, and you should do your own research when making decisions.