Bitcoin generated resistance at $37,500 on Friday amid growing speculation that a fresh drop is imminent.
BTC/USD candlestick chart 4 hours | Source: TradingView
Financing Rate signals the possibility of a price drop
Data from trading view revealed $37,500 as the cap for the price action on Friday.
Although the price has gradually recovered after falling to a local low of $35,500 on Federal Reserve (Fed) comments, the bulls are yet to bounce BTC back to previous highs.
With funding rates now continuing to enter negative territory, it looks like the market is waiting for a test of the near $30,000 support area.
“Funding turned even more negative as investors were spooked by Powell’s anti-inflationary resolve. Overall, it looks like the market is expecting Bitcoin to bottom out after its recent test of $34,000,” summarizes a report by research firm Delph Digital.
Bitcoin funding rate chart | Source: coin jar
While funding rates remain low, no doubt creating a short squeeze opportunity, sentiment turned on Friday on news that the US government is preparing crypto regulation, as reported by Bitcoin Magazine.
The shift on the regulatory front follows the debate over the environmental impact of mining and is also fraught with challenges like the arduous path of last year’s bill, which met with opposition, to regulate cryptocurrencies for tax purposes.
With the short time frame appearing unattractive, hopeful analysts have been looking for clues in investor behavior.
Popular Twitter account Material Scientist, the developer of on-chain analytics Material Indicators, noted that one company’s ongoing buying activity increased this week.
In the last week, someone has TWAP’t a net of +$200 million with orders in the range of $10,000 to $100,000, making up almost all CVD on Binance.
h/t [email protected] in our TG#BTC pic.twitter.com/IdGQQrFwfj
— Materials Scientist (@Mtrl_Scientist) January 28, 2022
“In the last week, someone has made over 200 million TWAP with orders in the range of $10,000 to $100,000, accounting for almost all of the total CVDs on Binance.”
The data also shows that holders remain resolute in their positions in line with the midpoint of market cycles.
Bitcoin loss from panic selling in 2022
BTC sellers’ losses are mounting as the price falls and some investors are panicking at current prices.
According to data from an on-chain analytics company glass node and the Decentrader transaction suite, more and more BTC units are selling coins for less than they bought in January.
While no one wants to sell assets without a profit, Bitcoin’s downtrend tends to compel a certain group of market participants to do so, fearing further losses if it continues.
Panic selling is often derided by long-term investors who claim that stronger, more liquid players are “looting” the supply at a loss for those who have sold.
Analysis of the Output-to-Profit Ratio (SOPR) revealed that Decentrader analyst Philip Swift said panic was brewing this year, although overall sales remained relatively low.
1/ SOPR (Spent Output Profit Ratio) has had a consistent patch of on-chain loss selling lately.
Indicated by the green bars in the chart. pic.twitter.com/9sV8nYgwFj
— Philip Swift (@PositiveCrypto) January 27, 2022
“SOPR shows recent consistent sales loss across the chain.”
SOPR uses aggregated “buy-sell price” data for BTC over time to get an overall picture of whether sellers are making profits or losses.
Follow notice by its creator, Renato Shirakashi, the sell-out mentality means that only people in a state of panic are able to do so. Or more broadly, less selling activity this month could be the reason for the relief.
“Interestingly, the selling loss of the past few months is much shallower than the 2018/2019 bear market, but much deeper than what we saw during both bull runs. Is it a bull market or a bear market now?”
SOPR chart belong Bitcoin | Source: Decenttrader
Bitcoin has surprised the entire market with a 50% drop since November, which is a bit strange as this should have been the most bullish phase of the halving cycle.
Zoom out the chart, the whole of 2021 looks like a consolidation zone after seeing a rapid rise a year ago.
WOMEN Big players dominate quantitatively transaction
If low-volume retail investors are sellers, this will be reflected in data such as the number of on-chain transactions.
Just like Glassnode did confirm This week, most trades are now “huge” sums of $1 million or more. The company concludes that this suggests that institutions are the driving force behind on-chain, not retail.
“Bitcoin transfer volume continues to be dominated by institutional cash flows, with over 65% of total transactions being over $1 million. Institutional dominance in on-chain volume started increasing around October 2020 when the price was around $10,000-$11,000.”
Transfer volume Bitcoin relative | Source: Glassnode
2022 is seen as the year when institutions really come back into the bitcoin space.
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