BTC speculators drop $5B – 5 things to know in Bitcoin this week
Bitcoin (BTC) touched $40,000 in the first three weeks of January, but where will the price of BTC go next year?
Following the launch of the first Bitcoin exchange-traded funds (ETFs) in the United States, price action has never been the same. Snap has surprised long and short BTC traders, both moving up and down, and the liquidity tells the story.
As a new week begins, Bitcoin faces two narratives at once: some believe that the reversal after the ETF's launch indicates a healthy test of support, while others see the previous domestic high as long-term.
There may be a grace period of up to two weeks to decide before additional major factors begin. US macro data triggers will cool slightly ahead of another Federal Reserve interest rate decision at the end of the month.
Speculative traders are exhausting themselves by dumping billions of dollars in BTC losses over the past week.
Cointelegraph looks at the current state of BTC markets as they recover from a seminal event in Bitcoin history.
Bearish Bitcoin price targets post-ETF dip
After hitting $49,000 on the ETF's launch day, BTC/USD didn't sustain its momentum for long.
A subsequent decline took the market to the bottom of the established trading range, but sellers failed to force a true test of the $40,000 mark.
Instead, two local lows near $41,500 have been seen, with the second coming at the weekly close of January 14, data from Cointelegraph Markets Pro and TradingView show.
At the time of writing, Bitcoin is closing at $43,000 after a modest overnight relief.
Ahead of the close, trading inputs saw order book data with material indicators giving early warning that a test of support was on the way, but this could be too low.
“Binance's order book shows ~$270M in bids spread between $41.3k-$36.5k, with $68M concentrated in the $38.5k-$39.4k range. Also, the $26.5k wall was torn down and taken up,” read the X (formerly Twitter) comments section.
“These are all early signs that the bulls are in position for another resistance test. Watching the weekly close for further clues.”
Later, the popular trader presented a list of signals to believe that the Skew will continue its descent from the lows.
These include retrieving $42,500 on the daily timeframes, the Relative Strength Index (RSI) staying above 50/100, and Bitcoin holding its annual opening price of $42,250 as support.
$BTC 1HNice jump so far, looking for more confirmations
Confirmation of higher rally: Consolidation recovery low price ~ $42.5KRSI More than 50 trades open every year as support 4H 200EMA pic.twitter.com/PMsE0FriBi
— Skew Δ (@52kskew) January 15, 2024
The retracement of $49,000, however, seems to hold most of the bulls in awe. According to data from statistical resource CoinGlass, on January 12, BTC long flowed to $112 million, making it one of the most expensive days in recent months.
For analyst Matthew Hyland, the range near $48,000 still presents trouble, and Bitcoin may need more time to overcome based on recent events.
In his last X posts, he warned that a move to the mid-$30,000s could still happen.
#BTC looks to be bottoming out after testing the $48K area.
But there's still a chance of it coming back here, but the odds are currently in the mid-30s: https://t.co/fdaKmF9nNi
— Matthew Hyland (@MatthewHyland_) January 14, 2024
That's a popular theory that calls for more flow around $30,000, but as Hyland and others look at the continuation of the bull market, that view isn't universal.
As reported by Cointelegraph, the controversial trader Il Capo of crypto believes that there are still new macro lows, which will be as low as $12,000.
Markets will see Fed cuts in March, even if CPI rises too much.
Those hoping for a break from volatility may get their wish this week – at least from a macro perspective.
ETF trading aside, US data releases are expected to moderate in the coming days, with unemployment data leading the list of inbound releases.
With just two weeks to go before the Fed's next meeting to decide on interest rate changes, the outlook for inflation remains grim. Last week's largely subdued Consumer Price Index (CPI) numbers showed that prices rose more than expected in December 2023.
Although markets do not believe that the Fed will cut rates this month, the numbers are not lost on the public.
Responding, trading input Kobeisi's letter described the Fed's work as “not yet complete.”
Despite this, he continued, markets will see price cuts – a benefit to risk assets, including crypto – coming at a rapid pace from March.
There are people there.
Markets are now expecting rate cuts at each meeting in 2024 starting in March.
that's right.
The Fed will make 7 straight interest rate cuts this year to lower the fed funds rate to 3.75% from 3.50% in December.
Meanwhile, the Fed's latest guidance shows cuts in… 3 pic.twitter.com/NaW2K1ulQE
— Kobeissi Letter (@KobeissiLetter) January 12, 2024
According to data from the CME Group's FedWatch Tool, the odds of a January rate hike remaining unchanged — already in place for several months — are currently above 95%.
The shock of Bitcoin speculators is that they sell about 5 billion dollars a day
For many, ETF week has finally become the week to sell Bitcoin, not sell it.
Although institutions will eventually have the opportunity to increase their exposure to BTC, price action has shown the psychological impact of volatility in the classic pattern.
The $50,000 mark was too much for the bulls, who lined up for the later whales, but the change to $40,000 caused quite a stir.
This is evident in the rate at which BTC is sold for less than it was bought for. According to data from the chain analytics company Glassnode, on January 12, this reached 88,000 BTC ($3.75 billion).
“It's mental,” James van Straten, research and data analyst at crypto insights company CryptoSlate, responded, with total sales of 111,000 BTC (currently $4.7 billion).
The sale, however, came from short-term holders (STHs) – entities that held their BTC investments for up to 155 days. The ETF announcement appears to have given speculators a reason to buy in hopes of further losses.
Glassnode shows that, in contrast, long-term holders (LTHs) were less responsive to the events, resulting in loss-making sales.
Bitcoin miners may not see the fallout as a problem.
Based on recent price action, it may therefore seem unlikely that Bitcoin will be due for another problematic surge.
Estimates say the opposite – at $ 42,500, Bitcoin's mining problem may still rise by 0.35% this week, according to data from BTC.com, a source of chain statistics.
The move is impressive – miners have weathered the storm of ETF volatility, and the competition for block grants is extremely strong.
According to Cointelegraph, during the third and fourth quarter of 2023, the problem has grown to a high, practically unchallenged, with a modest 1% decline in December.
The key moment for miners is approaching, with the April block subsidy event halving, reducing the amount mined by 50% to 3.125 BTC.
Until then, payouts will remain high as the hash rate continues to circle the all-time highs seen during Christmas.
“Bitcoin payments have now halved from December highs. Now, set for a peak during the May 2023 Inscription frenzy,” van Straten said in an X post on the topic over the weekend, alongside Glassnode data.
“It will be interesting to see where this level goes and it will have an impact on when miners go to halving.”
Ethereum may be next to come back to Earth.
As Bitcoin suffered post-ETF, the biggest altc was Ether (ETH), which picked up the slack.
Related: Bitcoin price tumbles after spot ETF approval, but ICP, TIA, MNT, SEI and altcoins bounce back
ETH/BTC made rapid gains late last week, and ETH/USD reached its highest level since mid-2022.
However, some are sounding the alarm as open interest has mushroomed, and speculative ETH bets may soon become unbearable.
“There is still a sword of Damocles on the Ethereum market in the form of $1.35 billion in new open interest,” warned X followers on Jan. 14, an advertiser on the chain's analysis platform CryptoQuant.
Van Straten, meanwhile, noted a shift in open interest from bitcoin to ether, leaving CME Group's bitcoin futures in the “backward” range — below the spot price.
This, he pointed out, is the reason for the excitement about the possible Ethereum ETF for Larry Fink, the CEO of asset manager BlackRock.
“OI in CME is down 13% from the peak ($700M), while ETH OI is 14%,” he said, adding that this could ultimately be a “buy signal” for Bitcoin.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
