bitcoin (btc) recently experienced a sharp drop, falling towards $40,000 amid a broader sell-off across the cryptocurrency market. While the top token managed to recoup some losses, currently trading 4% down at $42,000, concerns remain regarding the possibility of further downward price action before a potential recovery.
Investors are cautious about entering short positions in btc
According to a recent CoinShares report, digital asset investment products witnessed their 11th consecutive week of inflows, totaling $43 million. In particular, there was a significant increase in short position inflows due to recent price appreciation and perceived downside risks.
Europe led with 43 million dollars in tickets, followed by the United States with 14 million dollars (half of them in short positions). On the other hand, Hong Kong and Brazil experienced outflows of $8 million and $4.6 million, respectively.
bitcoin remained the main focus of investors, attracting $20 million in inflows, bringing year-to-date inflows to $1.7 billion. Short positions in bitcoin saw inflows of $8.6 million, suggesting that some investors view current price increases as unsustainable.
ethereum (eth) also saw increased interest, with its sixth week of inflows totaling $10 million, marking a change from previous outflows.
Selling Pressure Increases as Miners Decrease bitcoin Holdings
According According to Satoshi Club, there are signs that miners are selling their bitcoin holdings following the recent price drop. The data shows a significant decline in miners' btc holdings, with increasing flows to exchanges, suggesting selling pressure in the market.
Satoshi Club's analysis highlights that this trend could be attributed to the planned halving in 2024, which will reduce miners' rewards by half.
Furthermore, bitcoin's net unrealized profit/loss, which indicates the investor's profit rate, has overcome 0.5 for the first time since December 2021. This suggests that a significant portion of bitcoin investments are currently profitable, which could lead to further selling pressure at current price highs.
btc Bullish Structure Intact, But Deep Correction Threatens Run
On the 1-day chart of bitcoin, the current trading price is closely aligned with a support level. Despite briefly falling below this level, bitcoin has managed to recover and trade above it, mitigating further declines.
However, in case the selling pressure continues and its current price level cannot be maintained, bitcoin's next critical support level would be $39,990.
It is worth noting that during the previous hype around the bitcoin milestone, many traders entered long positions below current levels. This influx of long positions could trigger a search for liquidation before a recovery occurs.
If such a scenario plays out, the search for liquidations could push bitcoin price down further, potentially testing the support levels at $38,700 and $37,800.
On a positive note, the current situation of bitcoin bullish structure would remain intact unless a significant correction occurs, pushing the price below the $29,900 level. This level started the current bitcoin bull run in late October.
The future outcome depends on whether bitcoin can successfully hold its closest support levels and facilitate a recovery that shifts focus from hunting long positions to hunting short sellers, eventually reclaiming previously conquered territories.
Featured image from Shutterstock, chart from TradingView.com
