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Bitcoin managed to hold the psychological level of $40,000. However, the market sentiment is still pessimistic. Investors have been withdrawing money from crypto funds for the fourth week in a row, while major buyers continue to remain neutral. The situation indicates that the cryptocurrency will not end its decline at the level of $40,000. Besides, a retest of deeper local lows is most likely.
Bearish sentiment of large investors reflects a general negative attitude to the cryptocurrency market and bitcoin. The outflow of funds from cryptocurrency products lasts for its fourth week, forming a negative trend. Last week, withdrawals reached $207 million. The negative trend of investing in cryptocurrencies is attributed to the imminent tightening of monetary policy by the US Federal Reserve. Institutional interest in the first cryptocurrency will remain. However, it will decrease significantly due to the increase in the key rate and the winding down of the economic stimulus program. Besides, I assume that the key reason for the outflow of funds from crypto deposits is total fear and reaching local lows by bitcoin and major cryptocurrencies.
The second biggest cause of fear in the market and the decline in BTC/USD quotes is the largest bitcoin-futures liquidation dominance since May 2021. According to Glassnode, long positions accounted for most of the liquidations of BTC-futures. A similar situation occurred when bitcoin fell below $40,000. However, the asset was pushed back out on heavy volumes when shorts were sold. The extremum of liquidation of long positions is another cause for fear in the market and likely further declines.
I already mentioned the attempt to catch the "falling knives". Yesterday, on January 10, a false break below $40,000 occurred. However, later the price made a sharp reversal upwards. This situation happened as the majority of investors were shorting. It is a positive local signal as often the market moves against the expectations of most of its players. In other words, the optimal solution is rise. Moreover, in the next two days it will be clear whether bitcoin and the cryptocurrency market reached the bottom or the fall will be even deeper.
As of January 11, bitcoin continues to trade near the psychological level of $40,000. It is a key support zone of the broad range of $40,000-$50,000. If the asset breaks the support area of $39,600-$40,000, a further decline into the range of $32,000-$35,000 is most likely. However, the price will probably hold the current positions and gradually start increasing within the flat movement in the range of $40,000-$44,000. The volumes of purchases are still small, though there were the first positive signals. Technical indicators are recovering after a confident rebound from the decline below $40,000, indicating bulls' deep interest in this area. On the daily chart the situation looks optimistic: uncertain doji candlesticks were formed for four days after the downtrend. It is a sign of the end of the fall and the formation of a stable support zone. Stochastic oscillator formed a bullish cross, also indicating the possibility of upward movement or at least holding the current positions. Bitcoin is close to a turning point. However, its chances to go down and up are nearly equal.
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