Bitcoin price has stagnated around $42,000 since the ‘sell-the-news’ cycle on the Bitcoin ETF narrative caused a 15% pullback last week.
Bullish winds from the Bitcoin spot ETF approval saw Bitcoin price race to a local high of $48,900 on January 11. However, speculative traders who “sold the news” instantly sent the BTC price tumbling by 15% to $42,000 within hours.
Can Bitcoin Price Avoid a Downturn Below $40,000? On-chain data analysis provides important insights.
Large institutional investors continued to buy Bitcoin behind the scenes
Speculative traders took advantage of the price rally that followed the long-awaited ETF approval ruling on January 11, to sell at the top and book substantial profits. In fact, Bitcoin has shown relatively flat price action since then.
Interestingly, a key chain metric shows that large institutional investors have remained resilient amid the downtrend.
IntoTheBlock’s large-holder net flow chart tracks corporate investors’ trading activity by measuring total inflows against daily outflows from wallets holding at least 0.1% of a cryptocurrency’s current circulating supply.
The Large Container net flow has been trending in positive values since the BTC price decline started on January 11th. More specifically, the whales acquired a total of 15,950 BTC between January 11 and 17.
The chart above clearly highlights that while the BTC price has been falling since January 11th, the whales have remained in accumulation mode.
Valued at the current price of $42,700, the 15,950 BTC newly acquired by the whales in the past 7 days is worth approximately $681 million.
Given the growing adoption of the newly launched Bitcoin ETFs, the participants and fund sponsors are likely to sustain this whale buying trend in the coming days.
If this scenario plays out as expected, Bitcoin will attract sufficient demand to hold above $40,000 in the short term.
Retail investors are gradually re-taking bullish positions on BTC
The sell-the-news panic that followed the Bitcoin ETF approval led retail investors to shift focus from BTC to ETH and other top altcoins. But recent on-chain data readings show that day traders are gradually turning bullish on BTC again.
IntoTheBlock’s total exchange order book chart captures the total active buy/sell orders currently listed for a cryptocurrency across multiple exchanges.
Currently, there are active buy orders for 44,709 BTC listed across 20 crypto exchanges, including Binance and Coinbase. Meanwhile, total active sell orders stand at 40,968 BTC.
The chart above shows that the market demand for Bitcon exceeded the active sell orders by 3,781 BTC. Intuitively, when demand for an asset exceeds supply by such a large margin, it suggests that the momentum is tipping in favor of the bulls.
This suggests that as the panic selling that followed the ETF approval subsides, retail investors are gradually returning to bullish positions.
In summary, the whales’ resilient buying pressure and the excess market demand for BTC are two important short-term indicators that suggest a BTC price will remain above $40,000 in the days ahead.
BTC Price Prediction: Break above $44,000 could catalyze more gains
Drawing inferences from the whales’ buying tendencies and active Bitcoin trading orders analyzed above, it looks like BTC price will consolidate above the $40,000 mark in the near term.
But for the bulls to gain control of the market, they must first scale the $44,000 resistance level. IntoTheBlock In/Out of the Money data, which groups current holders by their historical entry prices. also confirms this point of view.
It shows that 2.6 million existing investors acquired 994,100 BTC at the maximum price of $44,088. If those holders want to sell as BTC approaches their breakeven point, it could inadvertently cause a pullback.
But if the bulls can gain enough momentum to break through the $44,000 selling wall, it could open the door to a possible $50,000 retest.
Alternatively, if things take a bearish turn, the bulls can rely on the historically significant buying wall at $40,180 for initial support.
The chart above shows that 731,800 addresses acquired 336,060 BTC at the maximum price of $40,178. If they make frantic efforts to cover their positions, Bitcoin price could stage an immediate pullback from that range.
Disclaimer for Uncirculars, with a Touch of Personality:
While we love diving into the exciting world of crypto here at Uncirculars, remember that this post, and all our content, is purely for your information and exploration. Think of it as your crypto compass, pointing you in the right direction to do your own research and make informed decisions.
No legal, tax, investment, or financial advice should be inferred from these pixels. We’re not fortune tellers or stockbrokers, just passionate crypto enthusiasts sharing our knowledge.
And just like that rollercoaster ride in your favorite DeFi protocol, past performance isn’t a guarantee of future thrills. The value of crypto assets can be as unpredictable as a moon landing, so buckle up and do your due diligence before taking the plunge.
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