Bitcoin was rejected as it approached $40,000 and saw an increase in volatility during today’s trading session. The first crypto by market capitalization is trading at $37,400 with a loss of 4.3% in 24 hours.
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There has been a shift in market sentiment as Bitcoin tries to rebound from a low near $33,000. A large portion of traders seem to have positioned themselves on the short side.
On the Binance crypto exchange, according to Jarvis Labs, derivatives funding rates have turned negative. However, they have yet to reach levels similar to other downtrends.
As the chart shows, funding rates on this platform are barely in negative territory whereas in June 2021, when Bitcoin hit a yearly low of $28,800, the metric was higher. This suggests that there is room for more downside and more bearish sentiment in the market.
Bitcoin investor David Ellis has been tracking large BTC holders and their movements for a few months. Ellis found potential for more danger as most of these investors unload their funds with the recent BTC price action.
Although there has been some demand for Bitcoin from “Blue Whales”, overall demand and address distribution seem to indicate low interest in the cryptocurrency. Most likely caused by the potential change in central bank monetary policies and investors preferring to leave capital on the sidelines. Ellis noted:
This is the third consecutive day of coin consolidation at the top. On the surface, the contraction of addresses is alarming. This could mean broad declining interest. My only hope is that some Orca wallets will be combined into BW wallets. Otherwise, we might have a problem.
Why Bitcoin Could See Some Relief
Other data provided by Material Indicators (MI) suggests that Bitcoin may be retesting its most recent lows as the bid order below its current levels looks more like a thing. Only around $5 million holds BTC’s current levels, but at the time of writing, some bulls are trying to defend $37,000 and prevent a bigger drop.
It looks like the auctions have been moved to #BTC buy zone to defend $37,000 for now. keep watching #FireCharts. Not sure if this game is finished yet.https://t.co/zw0ufgPIMt #cryptocurrency #trade #tradingstrategy #tradingsignals pic.twitter.com/t2LPz9N0mh
— Material Indicators (@MI_Algos) February 2, 2022
In favor of the bulls, the US Dollar (DXY) has been showing weakness over the past few weeks. The currency was rejected north of 97 according to this index and may continue its downtrend to 94.616.
These levels should work as critical support for the US Dollar and may reduce recent selling pressure, which could allow Bitcoin to hold its support line and make another push into the $40,000s.
$DXY is still taking off. 95.50 is probably next.
A close below 94.60 is needed to reverse the trend. https://t.co/H19EgXmOKs pic.twitter.com/B56TVODA3F
— Justin Bennett (@JustinBennettFX) February 2, 2022
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Additionally, as reported by NewsBTC, the US Federal Reserve is expected to keep a lean schedule for the entire month of February. There are a few important events in the coming weeks, the US Consumer Price Index (CPI) report, but the institution is expected to remain relatively calm until March 17and.