Bitcoin Trading Above $40K Again, Will Be Different This Time?

Bitcoin has bounced back to the $40,000 level as it bounced off the high of around $30,000. The first cryptocurrency by market cap managed to hold off the bears and recover some of this week’s losses.

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At the time of writing, the price of BTC is trading at $40,200 with a gain of 3% in the last 24 hours.

BTC is moving sideways on the 4-hour chart. Source: BTCUSD trading summary

Overall sentiment in the market seems pessimistic as Bitcoin remains within range in higher time frames. The cryptocurrency has been trading in the $30,000 to $60,000 range for the past few months, and in a tighter range.

Unable to break above the local resistance, located at $45,000 and $48,000, market participants appear to have lost their belief about the short-term valuation unless the price of BTC can break above those levels.

According to a recent market update Posted According to Material Indicators (MI), in BTC’s current price range, the area between $36,500 and $40,500 is the most critical. These levels act as a consolidation range and as a zone with a “marked preliminary accumulation phase and distribution”.

In other words, those levels have been important to Bitcoin because they provide clues about possible price action. As seen below, since 2021, when the cryptocurrency hits these levels, either move up to the top of its range (around $69,000) or lower to retest the support.

To discover BTC’s current stage, MI analysts looked at the cryptocurrency’s heatmap along with three key moving averages. The first is the 100-day moving average that is around $36,000, the second is the 200-day moving average around $21,000, and the third is the 50-day moving average around $45,000.

The analysts showed the chart below and said:

Zooming in on the 3-day chart shows that 3-day 50MA crosses below the 100 3-day MA have caused rallies and interaction with the 3-day 200 MA has led to a rally or collapse towards the macro floor. BTC ticked all those boxes this week.

Source: Material Indicators via Twitter

Bitcoin about to see more losses?

The macroeconomic outlook predicts further losses for Bitcoin and other risky assets. That’s why the analysts said the situation could get “worse”.

Material indicators suggested that BTC’s current price action could be a way for major investors to increase their short positions before retesting the macro floor around the 200-day moving average. Therefore, they advised market participants to exercise caution. They added:

Until #BTC regains its main moving averages, they are considered distribution rallies used to sell the rip or add short positions. Expect more volatility in the monthly close/opening.

MI’s analysis shows that leveraged traders should be wary of emerging volatility or monitor their expectations of an immediate top-of-the-range rebound.

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At the same time, much of the market appears to be expecting more downside effects. An increase in short positions could leave these participants vulnerable to a long-short squeeze and push Bitcoin to previous highs.

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