Analyst identifies key price level to validate Bitcoin’s bullish scenario

After days of correction that saw Bitcoin’s (BTC) valuation face the possibility of an extended sell-off below the $40,000 mark, the premier cryptocurrency made short-term gains as it seeks a sustained rally to establish

As the market anticipates Bitcoin’s next move, a crypto analyst by the pseudonym IamZeroIka, in an X (formerly Twitter) post on January 27, identified a critical price level that could determine the fate of Bitcoin’s bullish momentum.

According to the expert, Bitcoin’s recent bounce, which saw it touch above $38,000 for the first time in weeks, could be a temporary rally if it fails to break the $42,000 mark. He noted that breaking this resistance level would open the door for further gains, possibly pushing Bitcoin towards $44,000 or even $46,000.

“Unless Bitcoin reclaims the 42K (HTF), this is nothing more than a lower high in my opinion. <…> Anything below 48K can be used as fuel to reload short positions,” he said.

However, failure to reclaim $42,000 could have significant consequences, suggesting that bears could regain control and drive the price further if Bitcoin remains below this key level.

To further emphasize his point, IamZeroIka provided a simplified overview of the daily chart technical analysis, highlighting three important bearish signals. First, he pointed to the break of the three-month uptrend line, indicating a potential shift in momentum from bullish to bearish.

At the same time, he observed a break in the structure, suggesting that falling below these levels could potentially set the stage for further declines. Finally, he focused on the liquidity in the $32,000 and $36,000 zone. In this regard, the zone appears to have a high concentration of buy orders, which can act as a magnet for the price if it falls, possibly accelerating the downward trend.

Bitcoin turns bullish as GBTC sales slow

It is worth noting that the recent Bitcoin sell-off came against broader market expectations following the approval of the spot exchange-traded fund (ETF). Indeed, part of Bitcoin’s volatility has been attributed primarily to outflows from the Greyscale Bitcoin Trust (GBTC).

Notably, the recent surge in the asset’s valuation has coincided with an increasing slowdown in outflows from GBTC. The constant slowdown may suggest the beginning of a delay in redemptions.

In this context, JPMorgan (NYSE: JPM ) strategist Nikolaos Panigirtzoglou suggested that the Bitcoin selloff may be nearing an end, saying that the “GBTC profit-taking has largely taken place.”

Meanwhile, BlackRock’s (NYSE: BLK ) Bitcoin ETF is poised to hit a notable milestone by surpassing $2 billion in assets under management. The firm’s latest product maintains its dominance in the burgeoning category of ETFs, which is seen as positive sentiment for the market, given BlackRock’s status as the world’s largest investment firm.

In particular, at the beginning of the week, Bitcoin experienced a significant decline, falling below $39,000 for the first time since early December. Interestingly, several analysts have projected that the selloff could extend further to the $30,000 level, so the continued recovery could be welcome news for the market.

Bitcoin price analysis

At press time, Bitcoin was trading at $41,701, up nearly 3% on the daily chart. On the weekly chart, BTC is up less than 1%.

Amid the current bullish sentiments, Bitcoin technical analysis is dominated by neutrality. The summary of the one-day gauges obtained from TradingView recommends ‘neutral’ at 9. The same sentiment is replicated for moving averages and oscillators at 1 and 8, respectively.

Finally, while Bitcoin is showing bullish sentiments in the short term, the asset needs more convincing to break past the $42,000 mark, which remains a key resistance zone for further gains.

Disclaimer: The content on this website should not be considered investment advice. Investing is speculative. When you invest, your capital is at risk.