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- 1 Grayscale outflows causing major selling pressure.
- 2 Technical indicators show increasing bearish sentiment.
- 3 Analysts predict further downside towards $38,000 support
Bitcoin’s struggle to maintain momentum above $45,000 in January, despite positive sentiments surrounding the launch of spot ETFs in the U.S., raises concerns. The cryptocurrency is now at a notable risk of falling below the critical $40,000 level by the end of the month, primarily due to increasing downward pressure.
Despite initial optimism surrounding the potential impact of spot ETFs, the failure to sustain momentum suggests that market forces and selling pressure may overpower positive sentiments. Investors and analysts closely monitor the situation, acknowledging the heightened risk of Bitcoin experiencing a drop below the $40,000 support level in the near term.
Billions in Grayscale Outflows Weighing on Bitcoin
Much of the selling pressure stems from over $2 billion in outflows from the Grayscale Bitcoin Trust (GBTC) over the past week. The trust recently converted to a spot-based ETF structure, leading investors to shift holdings to take advantage of cheaper access to direct Bitcoin exposure.
So far, around 52,000 Bitcoins worth $2.1 billion have been redeemed from GBTC based on data from on-chain analytics firm CryptoQuant. With Grayscale holding more than 566,000 BTC, further redemptions could place substantial selling pressure on the market.
Sentiment Shifting Increasingly Bearish
In addition to Grayscale outflows, Bitcoin’s technical indicators are painting a bearish picture, indicating a potential further decline in its value. The Relative Strength Index (RSI) is below 50, indicating a shift towards bearish momentum.
Moreover, the Moving Average Convergence Divergence (MACD) indicator remains in negative territory, with no impending bullish crossover anticipated.
These technical signals collectively suggest that bears dominate the market sentiment, and Bitcoin faces challenges in sustaining the $41,000 level. Investors and analysts closely monitor these indicators as they hint at a potentially extended period of downward movement for Bitcoin.
Derivatives Markets Lean Bearish
The prevailing sentiment in the derivatives markets signals a negative outlook for Bitcoin. Recent data from Coinglass indicates that traders are increasingly betting on a decline, with open short positions surpassing long positions over the past week. This shift suggests a consensus among market participants that Bitcoin’s weakness will persist in the short term.
Notably, analysts, including those from 10x Research, anticipate further Bitcoin downturns. Their projections indicate the possibility of Bitcoin dropping below $40,000 and finding support around $38,000 by the end of January.
This cautious forecast implies that Bitcoin is at risk of extending its decline from its previous all-time highs, particularly if bearish technical indicators and derivative bets continue to materialize. Investors and observers closely monitor these signals for potential implications on Bitcoin’s price trajectory.
Conclusion
While the approval of Bitcoin spot ETFs initially boosted optimism, the cryptocurrency has faced steady selling pressure from Grayscale outflows lately. With over half a billion dollars worth of Bitcoin still left in GBTC, the risk remains.
Moreover, increasingly bearish technicals and derivatives bets show traders bracing for a continued downtrend. Support may emerge around $38,000, but Bitcoin plunging under $40,000 now seems probable given building downward momentum.
The next few weeks will prove critical in determining if bullish sentiment can recover or if Bitcoin enters a deeper correction as the year begins.
Steefan George is a crypto and blockchain enthusiast, with a remarkable grasp on market and technology. Having a graduate degree in computer science and an MBA in BFSI, he is an excellent technology writer at The Coin Republic. He is passionate about getting a billion of the human population onto Web3. His principle is to write like “explaining to a 6-year old”, so that a layman can learn the potential of, and get benefitted from this revolutionary technology.
