Weekly Technical Overview: Bitcoin Breaches Below $40,000 – Head towards $30,000 Demand Level

2022/01/24 11:57:32

The Bitcoin market has crashed yet again. The bearish trend had already brought the prices down to the lows, but it certainly looks like the bears are not done. The critical demand levels are failing to hold, and the momentum of the sellers is picking up every step of the way..

The current bearish sentiment is not limited to the Bitcoin market but affects the entire crypto market. All cryptocurrencies took a plummet in the form of an impulse move by the sellers. The buying momentum that showed up during the beginning of the year simply turned out to be a retracement.

Bitcoin Price Update

The $40,000 level in BTC was held quite firmly a couple of weeks ago. The bounces brought by the bulls showed signs of their interest in making it the market's bottom. But as the market entered into the third week of January, the bears took over the game and breached the $40,000 support level.

The sellers managed to crush the market by 20% in a matter of three trading days. As of writing, the market trades at $36,000, which is also the swing low in the market.

Whale Alert

Crypto whales are moving huge sums in Bitcoin, while the Whale Alert monitoring and analysis program first spotted the enormous cryptocurrency movement. As per evidence from Whale Alert, the transaction took place on Saturday, January 22nd, 2022, at 23:15:58 UTC.

An astonishing movement of 3,500 BTC, worth 121,791,190 USD, was spotted by Whale Alert to an anonymous wallet. According to the transaction data supplied, this money was transferred through a notable crypto exchange.

El Salvador Buys the Dip, Tops-up Reserves to 400 BTC

El Salvador has added to its already sizable cryptocurrency holdings by purchasing 410 Bitcoins worth over $15 million. The quantity of bitcoin held by the government is estimated to be around 1,801 BTC, although this is not an officially recognized figure. Leading up to declaring Bitcoin legal tender in 2021, the government added 200 BTC to its reserves, bringing the total to 400 BTC.

US Fed to Aggressively Dial-back Ultra-easy Policy

A typical investment theory for Bitcoin is that it functions as a hedge against soaring inflation, especially as a result of government stimulus. Still, analysts warn that a more hawkish Fed might deflate the crypto market's sails. The Federal Reserve said its run of ultra-easy policy, since the start of the COVID epidemic, is coming to an end. As a result, the Fed is likely to take bold policy actions in response to increasing inflation.

For starters, the Fed announced it would reduce its monthly bond purchases more quickly. The Fed will buy $60 billion of bonds per month beginning in January. The Fed began tapering by $15 billion per month in November, doubled it in December, and plans to accelerate the decrease even more in 2022.

Once the tapering program is completed, the central bank plans to hike interest rates, which remained constant at this week's meeting. According to projections issued, the Fed expects three rate hikes in 2022, two the following year, and two more in 2024.

Russia's Central Bank Proposed Crypto Ban

Russia is considering a cryptocurrency ban, following in the footsteps of China, India, and Pakistan. During the previous week, Russia's central bank proposed a ban on the usage and mining of cryptocurrencies.

Officials claimed that cryptocurrency presented a threat to financial stability, individuals' well-being, and the country's monetary policy autonomy. In addition, authorities in the United States have likewise tightened their grip on key market sectors.

As a result, investors lose faith in cryptocurrencies and shift their investments to gold, a safe-haven asset.

Price Plummets, While BTC Mining Difficulty Records New Highs

Amid an escalating selloff, the Bitcoin network has reached a new ATH mining difficulty of 26.643 trillion, averaging the hashrate to 190.71 exahash per second (EH/s), indicating significant support from the mining community.

According to blockchain.com statistics, network difficulty decreased between May and July 2021 due to various factors, including China's nationwide ban on crypto mining. However, as displaced miners begin operations in other countries, the network difficulty has significantly improved in August 2021. Consequently, the BTC network reached an all-time high of 26.643 trillion on January 22.

Grayscale Bitcoin Trust (GBTC) Premium Find All-Time Low Amid Market Crash

Grayscale Investments, one of the major investment consultants for corporations entering the cryptocurrency market, offers the Grayscale Bitcoin Trust as an investment product.

As per Coinglass statistics, the trust's bearish premium has reached a new all-time low as bitcoin continues to suffer around the $30,000 level. Since February of last year, the GBTC has been trending down, with the premium presently hovering at 30%.

The trust's share premium has been at a severe discount because of the recent drop in institutional demand for the cryptocurrency.

The recent drop in premium discounts can be linked to several reasons, along with the debut of multiple spot exchange-traded funds (ETFs), which provide investors with the stock market vehicle to invest in Bitcoin in a regulated way.

Bitcoin Technical Analysis

The sellers have evidently taken over the Bitcoin market. Although the market bounced from the lows in mid-2021, taking it to the ATH, the sellers around the resistance levels smacked it down. This clearly indicates that the bears are not done yet.

Going back in time, the trending Bitcoin market has been paused since the beginning of 2021. Essentially, the market has been in a consolidation state for a year now.

However, the consolidation is not a sequence of lower lows and lower highs in the bigger picture. In other words, the retracement is not in the form of a downtrend.

Paying close attention to the supply and demand levels, the market shows bullish nature at $30,000 and bearish sentiment around $60,000. Technically speaking, the market has gone range-bound, with the former as the support level and the latter as the resistance level.

Bitcoin Price Chart on the Weekly Timeframe | Source: BTC/USDT

Shedding light on the momentum, there is power on both sides. The buyers strongly push the price north from the support level, while the sellers plummet it south in no time from their level of supply.

The breach below the $40,000 has probably converted a channel-based market to a range-based market. That being said, if the market reverses back up instantly from the current level, the channel could still hold, showing the existence of the buyers.

Given the momentum of the sellers, it would not be of surprise to see the bears push the market further south until the buyers show up at the bottom of the range at $30,000.

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