Bitcoin sees low demand as investors defend $37K, is BTC in trouble?

Bitcoin was rejected as it approached $40,000 and experienced a surge in volatility during today’s trading session. The first cryptocurrency by market cap is trading at $37,400 with a loss of 4.3% in 24 hours.

Related literature | Bitcoin Stabilizes At $37,000, But What Are Options Traders Doing?

BTC trends downward in the daily chart. Source: BTCUSD trading summary

There is a shift in market sentiment as Bitcoin attempts to bounce from a low of nearly $33,000. A large proportion of traders seem to have positioned themselves on the short side.

On crypto exchange Binance, according to Jarvis Labs, the financing rates for derivatives turned negative. However, they have yet to reach similar levels to other down trends.

BTC funding rates on Binance turned negative, but far from previous downward trends. Source: Jarvis Labs via Telegram

As the chart shows, funding rates on this platform are barely negative, while in June 2021, when Bitcoin hit an annual low of $28,800, the stat was higher. This suggests that there is room for more downward pressure and greater bearish sentiment in the market.

Bitcoin investors David Ellis has been tracking major BTC holders and their movements for several months now. Ellis has found potential for more danger as most of these investors are spending their money with recent BTC price action.

While there is some demand for “Blue Whales” Bitcoin, the overall demand and address breakdown seems to point to low interest rates on the cryptocurrency. Most likely caused by the potential shift in monetary policy from central banks, and investors preferring to keep capital on the sidelines. Ellis said:

This is the third day in a row of currency consolidation at the top. At first glance, the address contraction is alarming. It could indicate a broad decline in interest. My only hope is that some Orca wallets will be combined into BW wallets. Otherwise we may have a problem.

Coin and address distribution for Bitcoin in red, indicating low demand. Source: David P. Ellis via Twitter

Why Bitcoin Might See Some Relief

Further data from Material Indicators (MI) suggests Bitcoin could retest its most recent lows as the bidding order seems quite a bit below current levels. Only about $5 million is holding BTC’s current levels, but at the time of writing, some buyers are trying to defend $37,000 and avoid a bigger drop.

In favor of the bulls, the US dollar (DXY) has shown weakness in recent weeks. The currency was rejected north 97 according to this index and could continue its downward trend to 94,616.

These levels should act as critical support for the US dollar and could ease recent selling pressures, allowing Bitcoin to maintain its support line and make another attempt to hit the $40,000 mark.

Related literature | TA: Ethereum breaking this confluence resistance could spark another wave

In addition, as NewsBTC reported, the US Federal Reserve should be on a light schedule throughout February. There are some significant events in the coming weeks, the US Consumer Price Index (CPI) report, but the institution should remain relatively quiet until March 17.

Leave a Reply

Your email address will not be published.