The curious trajectory of the virtual currency over the past few months has sent the market into a strange state of bewilderment. Bitcoin’s the trajectories after the early November ATH of $69,000 are mostly in a downtrend – each making a higher high and a lower low.
The December 4 flash crash dragged Bitcoin down to $42k. When the same price level was retested on January 7, market sentiment took a turn for the worse.
Profits are decreasing
In December, Bitcoin recorded its most significant monthly loss since the crash in May 2021 when It dropped 49.2% from a high of $58,943 to $29,925 in just 19 days. In December, BTC fell more than 30% from its ATH of $69,000 as CME BTC Futures volume also recorded its biggest monthly drop of 77.4% to $11 billion.
Furthermore, spot volume from the 15 largest Top-Tier exchanges fell 22.6% from November, for a total spot volume of $1.4 trillion, according to report. This follows the overall trend of crypto prices falling in December. This continues into the new year, despite expectations of a bull run in 2022.
The market sentiment as BTC drops near the $40k mark is a state of ‘extreme fear’, according to the Bitcoin Fear and Greed Index. In fact, it recorded its lowest value since last July. Additionally, many Bitcoins moved to exchanges in the last week, showing a slight shift in investor sentiment.
Source: Glassnode
The net inflow represents investors’ selling intent, while the sustained outflow represents a strong HODLing sentiment. It also reduces the circulating supply. Thus fueling supply shock stories.
So, while the recent increase in net inflows to exchanges does not entirely signal a change in trend, it does indicate a potential for a future sell-off.
Next – $30K or $50K?
BTC price action now looks oddly similar to the price action in February to May when the price hit 4 peaks as the Relative Strength Index made lower highs. Four price peaks make lower highs along with RSI recreating the same downtrend that sent BTC down to $30K in May.
Source: Transactional Perspective
Yet again as Bitcoin stands near $40K, the question remains the same – Will Bitcoin see $50K or $30K first?
At the time of writing, the $40K support looks like the last hope of BTC bulls for a meaningful reversal if the support is similar and BTC can replicate the gains. However, there is still a larger bearish trend line to cross.
Currently, a reversal in the 365-day MVRV presents a pretty good reversal opportunity. However, if the price fails to hold, bullish expectations will be invalidated.
Source: Sanbase
If Bitcoin closes for the week below $40k, there’s a high probability that you’ll visit the $30k support in the short term. A critical reversal of the $40K level could send BTC moving forward.