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  • Bitcoin is likely to bounce from the $41k support zone.
  • The market sentiment leaned in favor of sellers and the MVRV ratio continued to fall.

In a recent post on X, data provider Santiment noted that a bearish shift in sentiment around the time of the news of a Bitcoin [BTC] spot ETF approval helped mark a local top. The 16.9% drop in price from last week’s high to the $40.6k level was accompanied by a shift in market sentiment.

AMBCrypto looked at some Bitcoin metrics and its liquidation levels to find out whether a bullish reversal or a bearish continuation is more likely.

The MVRV ratio falls below late-October lows

The rally in October 2023 saw the 180-day MVRV ratio on Santiment skyrocket. It reached a high on 6th December at 37.88%. This signaled a potentially overvalued asset. The metric has been in decline since then.

A couple of days after the spot ETF approval, on the 13th of January, it fell below 17.66%. BTC’s MVRV was previously at this mark on 28th October.

At press time, it stood at 10.88%, which was still positive but signaled holders were increasingly opting to sell a part of their BTC holdings.

Bitcoin retraces 16% after spot ETF approval as sentiment hits rock bottom

Source: Santiment

The weighted sentiment hit a six-month high between 9th and 11th January but has fallen drastically since then. It was a similar story for the social volume of Bitcoin. This suggested that the short-term hype had died down.

The ETF approvals led to a sell-the-news event, one that the market has not yet recovered from. The Open Interest has been falling since 5th December. The brief spikes in the interim period accompanied short-term price breakouts, which were quickly corrected.

Whale accumulation showed long-term investors still have hope

Analysis of the BTC supply distribution showed that addresses with 10k-1M BTC continued to add to their holdings in the past two months. Meanwhile, the 0-100 BTC holding addresses began to sell in the first week of January.

Bitcoin retraces 16% after spot ETF approval as sentiment hits rock bottom

Source: Santiment

Once more, this activity pointed toward some holders opting to take profits as BTC nears the 50k mark.

Traders could hope for yet another rebound from the $41k mark

Since the 11th of December, BTC has tested the range lows at $40.6k on six occasions. Each saw a rebound of varying magnitudes. Therefore, while BTC has a bearish structure and downward momentum, the chances of a rebound were present.

This was also why the range remained noteworthy, despite the two breakouts in recent weeks. They were reversed quickly, and the levels within the range continued to have significance.

Bitcoin retraces 16% after spot ETF approval as sentiment hits rock bottom

Source: BTC/USDT on TradingView

A drop below $40.2k would invalidate the idea of a bounce. The OBV can also aid in invalidating this idea. At press time it hugged the lower support level from late October. A slump below it would show that sellers remained dominant.

In this scenario, BTC would likely slide toward the next support zone at $37.5k.

AMBCrypto also looked at the liquidation levels data from Hyblock. Our inference is that the market is too heavily poised in favor of the bears to sustain the drop.

The liquidation levels at $42.4k and $44k amount to $181 million and $143 million respectively.

Bitcoin retraces 16% after spot ETF approval as sentiment hits rock bottom

Source: Hyblock

The Cumulative Liq Levels Delta was also massively negative, showing short liquidation levels vastly outweighed the long ones.


Read Bitcoin’s [BTC] Price Prediction 2024-25


Therefore, a bounce toward these two levels is possible.

In particular, the $42.4k and $44.3k levels are ones to watch out for. They are the mid-range and range high resistances respectively.


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