Well, the broader cryptocurrency has entered its second consecutive major day of correction with Bitcoin bleeding deep red. While Bitcoin has corrected a staggering 47% from its all-time high of $69,000, here’s why we think one should still wait and not jump right in to buy the dip .
Despite Bitcoin’s sharp correction last week, open interest in Bitcoin futures continues to remain high. Historical trends suggest that unless Bitcoin OI turns neutral or turns negative, we may not have completed the correction.
The crazy part is that the open interest hasn’t poured out yet pic.twitter.com/ivkPiYSTzQ
– Will Clemente (@WClementeIII) January 21, 2022
On the technical chart too, Bitcoin closed daily below $36.500. This is the lowest daily close since July 25, 2021. Twitter handle BTC Ninja writes that Bitcoin closed below 0.789 FIB. Hence, we can expect even more crashes as Bitcoin hits $33K and even lower.
#Bitcoin daily close at $36,456. Lowest daily close since July 25, 2021. It closed below 0.786, so the higher probability we could see 0.886 at $33k. #BTC $BTC pic.twitter.com/IHBA7Bj2xw
– TC Ninja (@ mario80503) January 22, 2022
Bitcoin Miner Capitulation Coming Soon?
Bitcoin miners have accumulated a lot so far in this recent correction. The data shows that miners have accumulated over 6000 BTC in the past two weeks as BTC corrects from $45,000 to $38,000.
Data from @cryptoquant_com pointed out that #Bitcoin Miners added more than 6,000 $BTC into their wallet in the last two weeks while #BTC went from $45,000 to $38,000. pic.twitter.com/VOkihaybpe
– Ali Martinez (@ali_charts) January 21, 2022
But now we are getting very close to the production cost of a BTC miner of $34,000. Now, if BTC price continues to correct further, we could see strong selling and speculation coming from Bitcoin miners. Last week when BTC was trading around $42.00, verified crypto analyst @venturefounder wrote:
The worst dumps #Bitcoin was due to miner speculation (December 2018, March 2020), when Bitcoin falls below cost of production, it is at risk of miner speculation BTC at risk of miner speculation at $30k in May. Production cost is currently $34k, lower 20% off current price.
Bitcoin’s Relationship with Nasdaq Hits New All-Time High
We know that the current correction in crypto is coming after a broader sell-off in the US stock market. Renowned market analyst Will Clemente write:
This week, Bitcoin’s correlation with Nasdaq hit an all-time high. Currently, there is no catalyst to cause private outflows for BTC, it just follows the risk-free behavior from high beta stocks.
On the other hand, the S&P 500 broke below the 200-DMA. Well, it could lead to more liquidation in the crypto space thus creating a possible ripple effect in the crypto market. Along with Bitcoin, altcoins have also entered a brutal correction.