On Monday, January 10, Bitcoin’s $40,000 landmark support was crushed causing the digital coin to fall to $39,800. This will be the first time since September 2021 that Bitcoin will fall below the $40,000 mark.
Frankly, a lot of investors saw this coming given the continuous downward trend that has dominated the market in the last six weeks. Data indicated Bitcoin reaching high volatility as the bears eventually drove the marker into the $30,000 price some.
For investors who predicted this movement, Bitcoin breaking the $40,000 support mark came as no surprise. The forecast has for long called for a similar floor to that of July; a little below $30,000. Michaël van de Poppe, Cointelegraph Contributor reacted to this development. He claims that Bitcoin trading below the $40,000 will only accelerate fear among crypto traders. For starters, there are digital currencies for novice that you can check.
Technical analyst and crypto trader, Rekt Capital, also claims that the primary point of Bitcoin support lies below the two Bollinger Bands. He claims the spot price is not closer than ever. On the other hand, a fellow analyst and trader, Scott Melker emphasized an increase in bullish divergence after longing Bitcoin at $39,800.
While Scott is being bullish, Van de Poppe claims more people are now contemplating selling off part of their Bitcoin. A bearish bias is now engulfing the market as more investors expect the price to drop even further.
This isn’t far-fetched given the price of Bitcoin has been falling for the past six weeks. Hence, a bear theory is a primary scenario many traders believe will play out.
At the time of this writing, BTC is back above the $40,000 support as the bull tried to find primary support. Checking the data from on-chain analytics resources and various crypto exchanges, a liquidation of $120 million was recorded on Coinglass. This liquidation occurred within one hour and across other crypto pairs.
One-third of the liquidation was attributed to Bitcoin with Bitcoin’s overall liquidation in a single day reaching $90 million. Altcoins also reacted to the subtle panic with Ethereum (ETH) falling below $3,000 for the time since October. The bearish fever also spread to other digital coins in the top 10 cryptocurrencies by market cap. This altcoin bled at a minimum of 5% within 24 hours.
Cause and Effect
Bitcoin bled continuously for six straight days and capped the bearish movement by breaking the $40,000 support mark. All these can be attributed to the Fed minutes revealing that policymakers had examined a fierce hike in interest rate. That’s not all, the policymakers also discussed a faster approach to regularize its balance sheet.
Kaiko, a crypto trading data firm, acknowledged in its weekly newsletter that the restriction of financial conditions will negatively affect risk assets like crypto and equities. With this restriction, risk assets become less alluring than safe-haven bonds.
Based on Kaiko’s assessment, the effect of the December
Fed meeting is evident. In fact, it has effectively shown the correlation between traditional assets and Bitcoin to be at the highest level in the last year.
No doubt the Federal Reserve’s meeting held in December had a major effect on global financial markets. After the announcement, lots of investors reacted quickly to the ofda of monetary regulation provoking this major effect. However, Kaiko believes that Bitcoin’s movement at the time of the volatility is proof of it being a risk asset.
The Technical Side of Bitcoin
Since the last price dip, technical analysis shows that Bitcoin’s selling pressure is beginning to wane. Bitcoin seems to be maintaining the $40,000 support, but upside movement is still restricted to the $43,000-$45,000 price range.
BTC is now up by 2% in the last 24 hours, however, nothing seems to be significant for the price action. The four-hour time frame chart shows that Bitcoin is surging from oversold level which is an indication of a short price bounce.
A look at the upside momentum showed that the bulls are already weakened given Bitcoin’s six weeks downtrend. From these indications, sellers should step vigilant around the resistance point as the price could further plummet
About The Author
Ashley Rosa
Ashley Rosa is a freelance writer and blogger. As writing is her passion that why she loves to write blogs related to the latest trends in technology and sometimes on health-tech as well. She is crazy about food.
