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10.01.2022 03:10 PM
Open demand for bitcoin falls amid market fears

Bitcoin continued its decline after reaching $42,000, slumping to $41,000. The quote reached the trend line starting near $10,000, which was regarded as a negative signal by the market, leading to an outflow from cryptocurrency funds. Investors shift from BTC to other assets amid the deteriorating situation.

Last week, BTC closed near $41,800, and BTC/USD fell by 12% over the week. The dominant position of bitcoin is under threat by the growing amount of third generation cryptocurrencies. The market's reaction to the cryptocurrency's massive dip is also a cause for alarm. According to CryptoQuant, open interest for BTC at all major exchanges has begun to decline.

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Declining open interest is a negative signal that could push the price down even further. In theory, BTC should have bounced upwards above $45,000. Instead, a sell-off began, followed by an increased coin flow. The current bullish trend is not over - in fact, it possibly has not even started yet. What seemed to look like a head-and-shoulders reversal pattern on the daily chart was likely a price movement within a wide consolidation range of $60,000-$40,000. This indicates the bullish trend is still continuing, and a rally could be expected in the near future.

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According to analyst PlanB, Bitcoin is in the middle of the 2020-2024 bullish cycle, and that despite the turbulence at the $1 trillion cap mark, BTC would continue its upward move towards the $10 trillion market cap target in 2024. PlanB did not mention any reasons for the increased volatility, though it can be attributed to rising competition from other cryptocurrency projects.

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Today, the asset bounced off the trend line this afternoon towards $41,400. Bullish traders are still too weak, and BTC would likely return into the $40,000-$41,000 area. If bitcoin breaks below this area, it could then decline into $35,000-$40,000 range, sending the Fear and Greed Index near 1. Technical indicators remain near monthly levels and show no signs of a possible rally. Although the situation remains tense, a bullish scenario is still on the cards. The current slump should be used for opening or increasing positions at a low price before the asset rallies towards new highs.

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Artem Petrenko,
Analytical expert of InstaForex
© 2007-2024
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