Bitcoin, the largest cryptocurrency by market capitalization, tanked on January 22, falling 2% in the past 24 hours to $40,960.
BTC/USD Daily Chart. Source: TradingView
Let’s look at the reasons why BTC is likely to recover in the short term.
Accumulation of shark and whale
A look at chain data shows that BTC’s ongoing correction may come to an end once the major holders start piling up more.
According to market intelligence firm Santiment, the percentage of Bitcoin supply held by sharks and whales is still “down slightly” compared to October when crypto prices started to rise.
continues to help trigger another #bullcycle for the #cryptocurrency sector as we saw in October, November and December. But whale rallying of these three assets in particular will be a key #bullish signal that many traders will welcome as the $BTC halving is now (continued) 👇
— Santiment (@santimentfeed) January 20, 2024
Sentiment added,
“But whale rallying of these three assets in particular will be a key #bullish signal that many traders will welcome as the $BTC halving is now just under 14 weeks away.”
This may not take long to realize as spot Bitcoin ETFs accumulate more of this asset. According to the latest data, spot Bitcoin ETFs now collectively hold 95,000 Bitcoin after six full days of trading, with assets under management (AUM) approaching $4 billion.
According to data provided by senior Bloomberg ETF analyst Eric Balchunas, capital inflows to the recently launched ETFs have surpassed outflows from the Greyscale Bitcoin Trust (GBTC).
Note: the more we think about it and talk to people, probably only a small minority of the GBTC outflows are going to the Nine right now, as a lot of it was FTX and traders discounting. Also the proportionality of the flow to the size of the firm is almost perfect, …
— Eric Balchunas (@EricBalchunas) January 20, 2024
GBTC’s assets under management decreased by $2.8 billion in the first six days of trading.
Continued accumulation would indicate that large investors believe the asset will continue to rise in the future, which is a bullish sign.
Declining BTC transfer to exchanges
More data from Glassnode, a blockchain market intelligence firm, shows that the amount of Bitcoin sent to exchanges has decreased over the past 10 days.
According to the chart below, the total transfer to exchanges decreased from 134,627 BTC on January 12th to 26,463 on January 21st.
BTC Exchange Inflow Volume. Source: Glassnode
A decline in Bitcoin exchange inflows suggests that fewer individuals are choosing to deposit their crypto on exchanges. This trend can be interpreted as a positive sign, indicating increased confidence among investors and traders to hold their Bitcoin rather than sell it.
Such behavior contributes to the stability of Bitcoin’s supply and potentially supports long-term investment strategies.
The Crypto Fear and Greed index is back in the “greed” zone after dropping to “neutral” last week.
Increasing bullish market sentiment could be a sign for a market-wide recovery. The “greed” value means market participants are hopeful that the market will take a positive turn in the near future.
Bitcoin is sitting on strong support around the $40,000 zone
From a technical point of view, BTC enjoys robust support to the downside. These are areas defined by the SuperTrend’s green line at $40,595, the 1000-day exponential moving average (EMA) at $39,310 and the 200-day EMA at $35388.
Perhaps the $40,000 buyer congestion zone is Bitcoin’s most important support line. Note that several attempts to pull the price below this point in the recent past have been futile. This level also serves as the last line of defense for Bitcoin at the moment.
BTC/USD Daily Chart. Source: TradingView
On the positive side, the SuperTrend indicator is still positive since the price broke below and changed from red to green on October 1st. This means that market conditions continue to favor the upside.
As such, increased demand from current levels could see the big crypto rise to confront resistance from the 50-day EMA, which currently stands at $42,030. Above that, the next line of resistance will be the $44,000 and $45,000 psychological levels, before the crypto rises to reach the long-awaited $50,000 mark.
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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.
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