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The cryptocurrency market and bitcoin have reached the bottom, hitting the lower trend lines. Digital assets declined due to oversaturation in the futures market and panic among investors, as well as recent unfavorable news.
Bitcoin's hashrate declined by 12%, contributing to BTC's slump to $42,000, as mining has remained one of the key components of BTC's uptrend over the past 5 years. In China, which constitutes 20% of the worldwide bitcoin network according to Bloomberg, the government pledged to fully eliminate crypto mining. This move could lead to further hashrate issues and increased volatility in the near future.
The Reserve Bank of India has created a cryptocurrency regulation board, amid the government's rollout of the digital rupee as legal tender for transactions. Cryptocurrencies could possibly become taxable assets similar to investment assets, which would be a negative signal for investors and the crypto market as a whole.
In Turkey, where crypto transactions have been on the rise following a 60% devaluation of the Turkish lira, the government is preparing its own set of measures against cryptocurrencies. Turkish president Erdogan is a known opponent of digital assets. Potential restrictions could be detrimental to the crypto market as well.
The number of short positions has increased, which indicates that BTC has bottomed out. Similar conditions were observed in May-July 2021, following China's cryptomining ban and the long period of BTC's sideways movement. $40,000 could be the bottom for BTC's slump. Major bitcoin miners, such as BTC Bitfarms, have taken advantage of the dip, expecting prices to grow - BTC Bitmaps bought 1,000 coins in the first week of January. This could indicate the correction would finally end in the $40,000 area.
According to technical indicators, a reversal is likely to occur. The Stochastic indicator has formed a bullish crossover, and the MACD suggests an upward momentum for the cryptocurrency. The RSI has moved into the bullish range, indicating an increased activity of bullish traders. BTC could consolidate in the $40,000-$45,000 range, followed by a recovery above $45,000. The period of consolidation is likely to be long, and the BTC dominance index remains low - traders should consider focusing on altcoins while the bitcoin recovers.
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