Bitcoin experienced a significant downturn, plummeting by 5.8% from $41,553 on January 22 to reach a six-week low of $39,372, marking a pivotal moment for the cryptocurrency market. This sharp drop resulted in the liquidation of $282 million worth of long positions across the crypto landscape.
Anticipating upward volatility that would maintain Bitcoin above the $40,000 mark, traders were taken by surprise as the flagship cryptocurrency failed to meet these expectations. The decline follows the recent approval by the United States Securities and Exchange Commission (SEC) of spot Bitcoin ETF products, contributing to market uncertainty.
Daily Catalyst 22-January-2023
📈Markets
• Markets are down, $BTC break below $40,000
• Volatility causes $138 million of liquidations on CEX
• Bitcoin ETFs now hold nearly $4 billion in assets
• $BTC correlation with $ETH hits lowest level since 2021
• $SEI and $NEAR are… pic.twitter.com/MTmrKzcUwW— Marco Manoppo (@ManoppoMarco) January 22, 2024
Influence of Grayscale and FTX Actions
Market observers attribute the sudden crash to the constant selling of Bitcoin linked to Grayscale’s GBTC at Coinbase. Grayscale‘s substantial deposit of over $600 million worth of BTC on January 22, coupled with FTX’s sale of its entire 22 million GBTC shares, amounted to nearly $1 billion in selling pressure on Bitcoin.
According to CoinDesk, investors have sold over $2 billion in GBTC, with a large portion coming from FTX estate selling 22 million GBTC shares worth nearly $1 billion, which brought FTX estate’s GBTC holdings down to 0. https://t.co/AXhwP91Xtw
— Wu Blockchain (@WuBlockchain) January 22, 2024
Lingering Market Uncertainty
Bitcoin liquidations chart. Source: Coinglass
Data from futures trading and information platform Coinglass highlights long-position liquidations for Bitcoin reaching over $61.99 million on January 22, surpassing short liquidations at $12.4 million. Cross-crypto long liquidations added to the impact, totaling more than $282 million.
Analyzing Bitcoin’s Current State
At the time of writing, Bitcoin is hovering around $39,983, supported by the 100-day exponential moving average (EMA) after losing the key support level at $41,890. The psychological level at $38,000 and the 200-day EMA at $35,418 are crucial downside levels to monitor, with the $35,000 support floor serving as the potential last line of defense, presenting a total loss of 12.5%.
Crucial Levels to Monitor
On the upside, significant levels include the 23.6% Fibonacci retracement level at $41,590, the 50-day EMA, and the major resistance level at $42,000. A breakthrough could propel Bitcoin towards the 50% retracement level around $44,000 and subsequently to $45,000, signaling a potential sustained recovery. Beyond this, the psychological level at $50,000 becomes a notable target for the cryptocurrency.
As Bitcoin navigates through these critical levels, investors and analysts closely monitor the market for signs of recovery or further declines, adding to the ongoing narrative of Bitcoin’s price movements.
