Bitcoin continued its decline after reaching $42,000, slumping to $41,000. The quote reached the trend line starting near $10,000, which was regarded as a negative signal by the market, leading to an outflow from cryptocurrency funds. Investors shift from BTC to other assets amid the deteriorating situation.
Last week, BTC closed near $41,800, and BTC/USD fell by 12% over the week. The dominant position of bitcoin is under threat by the growing amount of third generation cryptocurrencies. The market's reaction to the cryptocurrency's massive dip is also a cause for alarm. According to CryptoQuant, open interest for BTC at all major exchanges has begun to decline.
Declining open interest is a negative signal that could push the price down even further. In theory, BTC should have bounced upwards above $45,000. Instead, a sell-off began, followed by an increased coin flow. The current bullish trend is not over - in fact, it possibly has not even started yet. What seemed to look like a head-and-shoulders reversal pattern on the daily chart was likely a price movement within a wide consolidation range of $60,000-$40,000. This indicates the bullish trend is still continuing, and a rally could be expected in the near future.
According to analyst PlanB, Bitcoin is in the middle of the 2020-2024 bullish cycle, and that despite the turbulence at the $1 trillion cap mark, BTC would continue its upward move towards the $10 trillion market cap target in 2024. PlanB did not mention any reasons for the increased volatility, though it can be attributed to rising competition from other cryptocurrency projects.
Today, the asset bounced off the trend line this afternoon towards $41,400. Bullish traders are still too weak, and BTC would likely return into the $40,000-$41,000 area. If bitcoin breaks below this area, it could then decline into $35,000-$40,000 range, sending the Fear and Greed Index near 1. Technical indicators remain near monthly levels and show no signs of a possible rally. Although the situation remains tense, a bullish scenario is still on the cards. The current slump should be used for opening or increasing positions at a low price before the asset rallies towards new highs.
