Bitcoin Bears Eye Break Below $40K
Bitcoin bears are closely watching the possibility of the Bitcoin price breaking below the $40,000 level. The approval of Bitcoin ETFs has led to sell pressure and there are macro headwinds affecting the crypto space.
The Bitcoin price briefly dropped to the $40,200s before rebounding to around $42,000. However, it is still 15% lower than its yearly highs.
The bears remain in control as the BTC price is trading below its 21 and 50DMAs. Stronger-than-expected US economic data has reduced expectations for rate cuts from the Fed, resulting in higher US bond yields and a stronger US Dollar Index (DXY).
High Bitcoin Sell Pressure Amid GBTC Profit-Taking and Bitcoin Investment Product Rotation
Newly launched Bitcoin ETFs from Blackrock and Fidelity have seen significant demand, with over $1 billion in inflows since their launch. Bitcoin already ranks as the second most popular commodity ETF product after gold.
Traders are concerned about existing Bitcoin investment products being rotated to new ones. GBTC has experienced substantial outflows and profit-taking flows of $1.5 billion have already exited GBTC, according to JP Morgan.
With other Bitcoin products seeing outflows, there is a risk of high near-term sell pressure.
Here’s How Low the Bitcoin Bears Could Push the Price
Betting on spot Bitcoin ETF approval being a “sell-the-fact” scenario seems to have been proven right. JP Morgan predicts that sell pressure will remain high and potential macro headwinds may favor the bears.
If US interest rate futures markets reduce expectations for a March rate cut to zero, this could support further gains for US yields and the DXY, strengthening the bear case for Bitcoin.
A break below $40,000 is likely in the weeks ahead, potentially triggering a fresh wave of technical selling. The first area targeted by the bears would be the November 2023 highs in the $38,000 area.
Will Bulls Buy the Dip?
The bull case for Bitcoin in 2024 remains strong. New spot Bitcoin ETFs provide long-term demand, and the upcoming halving will reduce sell pressure from miners. Fed interest rate cuts are also likely in 2024, improving liquidity conditions.
Long-term bulls may take advantage of lower prices and chart analysis suggests that BTC may experience a bullish reversal. Technical buying could also support the price as it finds support around its mid to late-December lows above $40,000.
Hot Take: Bitcoin Bears Eye Break Below $40K – Here’s How Low the BTC Price Could Go
Bitcoin bears are closely monitoring the possibility of a break below $40,000 for the BTC price. Sell pressure from post-spot Bitcoin ETF approval and macro headwinds have put downward pressure on Bitcoin. While there has been a slight recovery, the BTC price remains lower than its yearly highs and is trading below key moving averages. High sell pressure is evident through profit-taking from GBTC and rotation of Bitcoin investment products. The approval of new Bitcoin ETFs has seen significant inflows but concerns remain about existing products being rotated to new ones. If macro headwinds persist and US interest rate futures markets reduce expectations for rate cuts, there is a risk of further declines in the BTC price. However, long-term bullish factors such as new ETF demand and the upcoming halving may provide support for Bitcoin.
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