Bitcoin is facing a crucial juncture after falling below what had been a key support area around $115,000. Increased selling activity is being observed across different trading periods. The upward drive that previously pushed prices higher seems to have diminished, and current price movements indicate growing vulnerability in the market. With investor confidence waning and turning to worry, more analysts are predicting a larger price drop, potentially below $110,000.
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CryptoQuant’s Axel Adler notes that Bitcoin has established a near-term resistance point at $112,000, which could mean the market is trying to find stability. But, Adler cautions that the range between $112,000 and $105,000 is still fundamentally shaky. It’s acting as a cushion, separating current prices from a greater risk of further declines. If sellers manage to push Bitcoin below $105,000, it might set off a wave of liquidations of long positions and force short-term investors to sell.
Given the global economic uncertainties and reduced inflows into ETFs, Bitcoin’s next steps depend on how it performs within this price range. A recovery above $112,000 would suggest strength, whereas a breakdown could pave the way for a more extensive market correction.
Bitcoin’s Failure to Regain Momentum Increases Risk for Short-Term Holders
According to Adler, the current structure of the Bitcoin market reveals increasing weakness, especially among short-term holders (STHs). Adler highlights that the realized price for STHs holding for 1 week to 1 month is at $117,000, meaning that this whole group is now experiencing losses. These investors, who are prone to reacting emotionally to short-term price swings, might be the first to panic and sell if any negative news emerges, which could then trigger a widespread sell-off across the entire market.
Adler also points to the $105,000 level as a vital support area, based on the total realized price of STHs. If Bitcoin falls to this level, the pressure to hold will increase, but it could also act as a powerful technical and psychological barrier that might slow down or even reverse the downward trend.
“The market remains weak,” Adler reiterated, sticking to his negative outlook from the previous day. He emphasized that retail investors are not succeeding in pushing the price higher, and the lack of consistent demand is contributing to the increasing fundamental weakness in the market.
Adding to the stress are recent weak US jobs figures, which have triggered new speculation about possible interest rate reductions by the Federal Reserve. Although this might be good for riskier assets in the long run, the current uncertainty is putting more pressure on already fragile market sentiment.
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Bitcoin Attempts to Recover Amidst Resistance Zone
The 4-hour chart for Bitcoin (BTC) shows a significant battle occurring below the $116,000 resistance zone. After briefly dropping below $113,000 earlier in the week, BTC has bounced back and is currently trading around $115,478, approaching the 100 and 200 moving averages, which are now acting as resistance overhead at $116,596 and $115,799, respectively.
The price is also trying to climb back above the horizontal level at $115,724, which previously acted as support but has now turned into resistance. This level provided support during July’s period of price consolidation. This combination of resistance factors – the Simple Moving Averages (SMAs) and the horizontal level – presents a significant short-term challenge. A clear breakthrough above this zone with strong trading volume could signal a renewed upward trend and potentially lead to retesting the high point of the $122,000 range.
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However, trading volume remains relatively low compared to the breakout seen in July, and the unsuccessful attempts to reclaim higher levels suggest that buyers are being cautious. Unless Bitcoin can successfully reclaim and hold above $116,000, the risk of rejection remains high, which could push the price back down into the lower support band of $112,000 to $113,000.
Featured image from Dall-E, chart from TradingView