The Bitcoin spot price (BTCUSD) experienced an approximate 8% decline this year following the approval of spot Bitcoin ETFs, triggering a ‘sell the event’ reaction within the market. The unexpected downturn saw Bitcoin descending from its peak around $49,000 to $40,170, highlighting its characteristic volatility.
This unpredictability has made industry giants like Vanguard cautious about joining the trend, as they recognize no clear role for ETFs in meeting long-term portfolio objectives for their clients. Despite the initial selloff, there are indications of a potential stabilization, entering a consolidation phase. This phase precedes significant inflation data in the US, a factor that could potentially shift market sentiment and consequently impact the Bitcoin market.
Technical
On the 4H chart, the current downtrend seems to have subsided, with the price action moving sideways in a consolidatory manner between $39,464 and $40,273. The 25-SMA (green line) offers support to the upside as the price attempts a breakout from the channel, which could trigger a new directional trend.
If resistance at $40,273 gets cleared, the bulls face a tough hurdle at the $40,581 resistance, where the 50-SMA (blue line) approaches. A retracement may occur at this point if the momentum fails to initiate another breakthrough. However, if the price moves higher, the market could look toward $41,447 and $41,951 as potential interest levels.
Conversely, failing to breach the $40,273 resistance could harm the bullish hopes. A pullback toward $39,464 then becomes likely, where a potential breakdown toward $39,001 could see the price falling back within its familiar downtrend pattern. Neckline support at $38,509 could be worth keeping an eye on if this bearish shift occurs.
Summary
While Bitcoin has largely been sold off in the opening weeks of the year, the formation of a consolidation at the bottom of the descending channel has fuelled hopes that a bullish retracement is on the cards. Resistance at $40,273 could be a determining factor as to whether this run could occur.
Sources: Koyfin, Tradingview, Vanguard
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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