Bitcoin (BTC) underwent a notable downturn, dropping to around $40,000 amid a widespread cryptocurrency market sell-off. Although the primary token has partially recovered, currently trading 4% lower at $42,000, apprehensions linger regarding the possibility of additional downward movement before a potential rebound.
Investors exhibit caution as short positions in Bitcoin (BTC) see increased inflows
In the latest CoinShares report, digital asset investment products recorded their 11th consecutive week of inflows, reaching $43 million. Noteworthy is the substantial rise in short position inflows attributed to recent price gains and perceived downside risks.
Europe took the lead with $43 million in inflows, trailed by the US with $14 million (half in short positions). Conversely, Hong Kong and Brazil saw outflows of $8 million and $4.6 million, respectively.
Bitcoin retained its central position for investors, drawing in $20 million in inflows and pushing year-to-date inflows to $1.7 billion. In contrast, short Bitcoin positions observed $8.6 million in inflows, indicating some investors perceive the current price upsurge as unsustainable.
Ethereum (ETH) experienced heightened interest, registering its sixth consecutive week of inflows at $10 million, marking a shift from prior outflows.
Bitcoin faces mounting selling pressure as miners reduce their holdings.
As per Satoshi Club, there are signs pointing to miners offloading their Bitcoin holdings in response to the recent price decline. Data indicates a notable reduction in miners’ BTC holdings, accompanied by a rise in transfers to exchanges, implying an increased selling influence in the market.
The analysis from Satoshi Club underscores that this trend may be linked to the upcoming halving in 2024, which is expected to cut miners’ rewards in half.
Moreover, Bitcoin’s net unrealized profit/loss, reflecting the investor profit ratio, has exceeded 0.5 for the first time since December 2021. This implies that a substantial portion of Bitcoin investments is presently profitable, potentially resulting in heightened selling pressure at the current price highs.
BTC’s bullish structure holds, but a deep correction poses a threat to its current run
On Bitcoin’s 1-day chart, the current trading price closely aligns with a support level. Although briefly dipping below, Bitcoin has successfully recovered, trading above it and mitigating potential further declines.
Yet, if persistent selling pressure prevails, and maintaining the current price proves challenging, Bitcoin’s next pivotal support level looms at $39,990.
Notably, during the earlier excitement surrounding Bitcoin’s milestone, numerous traders initiated long positions below the current levels. The influx of these long positions raises the potential for a liquidation hunt before a subsequent recovery takes place.
Should this scenario unfold, the pursuit of liquidations might propel Bitcoin’s price lower, potentially testing support levels at $38,700 and $37,800.
Positively, Bitcoin’s existing bullish structure would persist unless a substantial correction transpires, pushing the price below the crucial $29,900 level—the starting point of Bitcoin’s current bull run in late October.
The future outcome depends on Bitcoin’s ability to effectively maintain its nearest support levels, fostering a recovery that transitions focus from hunting long positions to targeting short sellers, ultimately reclaiming previously conquered territories.
