bitcoin price saw a fresh sell-off yesterday and fell more than 5% intraday to a low of $40,660. Since the year-to-date high of $49,000 on January 11, the price of btc has fallen by as much as 17%. However, according to renowned crypto analyst Jacob Canfield, this may not be the end of the correction. In a recent analysisCanfield warned there could be more downside in the short term.
The analyst, known for accurately predicting bitcoin's local top, addressed the prevailing uncertainty in the market. “The question everyone is asking now is 'where do we go from here?'” the analyst said, acknowledging the community's growing concern.
A major factor in the current market dynamics is the approval of a bitcoin ETF, which has led to speculation about Grayscale bitcoin Trust (GBTC) investors selling their holdings to evade the associated fees. The narrative is compounded by revelations from court documents that the FTX bankruptcy estate owns a substantial number of GBTC shares, approximately 22,280,720 (worth $744 million), ready for liquidation.
On the contrary, signs of optimism are emerging in the market as BlackRock's ETF, IBIT, reportedly aggressively accumulates spot bitcoin, adding up to 25,067 bitcoins in less than a week. The analyst suggests that this BlackRock buying momentum may eventually offset GBTC selling pressure, especially considering the impact of the upcoming bitcoin halving, creating a “delayed impact” event that could tip the balance towards demand over supply.
How low can the price of bitcoin fall?
Chart analysis provides a more immediate and bleak perspective. bitcoin's 4-hour chart indicates a lost trend now acting as resistance, historically a harbinger of short- to medium-term price movements.
“The 4-hour trend in bitcoin has been lost and tested as resistance. This is not very good since the 4-hour trend has historically been a good indicator of short and medium-term price movements, the analyst commented.
Canfield further notes: “If I were looking for a level for a short-term bounce, it would probably be a liquidity sweep of $40,000,” hinting at possible downward pressure on the price.
bitcoin's daily chart presents a narrow trajectory, with significant levels at $48.7K, marked by the 61.8% Fibonacci Retracement and weekly resistance, and a notable support level at $38.7K. “As I've noted in previous posts, after btc hits 61.8, it tends to sell off 18% to 22%, which would also give us another shot at that $38.7k level,” warns Canfield.
Furthermore, the daily 200 (EMA/MA) is currently trending up, having previously acted as support, suggesting that it could cushion a further price decline.
The analyst concludes with a word of caution, emphasizing the need for vigilance in the current market characterized by low volume and volatility, conditions that often precede substantial market moves: “The most important thing I can emphasize is that caution is needed during moments of low volume/low volatility. environments like what normally follows a big move.”
At the time of publication, btc was trading at $41,178.
Featured image created with DALL·E, chart from TradingView.com
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