Bitcoin and other digital currencies started this week with a bearish trend, following the initial surge in buying that occurred after the approval of exchange-traded funds (ETFs) linked to direct Bitcoin trading. This initial buying momentum appears to have declined. Despite expectations among investors for a strong rebound in Bitcoin’s price from its recent dip, the cryptocurrency struggled to attract enough buying interest, facing resistance from sellers. Consequently, numerous on-chain metrics have shifted to a bearish outlook, suggesting a potential new wave of liquidations this week. This shift is signaled by a significant rise in a key metric, historically associated with market corrections.
Mean Exchange Inflow’s Jump To Bring A Correction
At present, a fierce contest is emerging between buyers and sellers to establish a definitive trend for Bitcoin’s price, which is currently fluctuating just under $43,000. This tug-of-war has led to substantial liquidations by both parties during Bitcoin’s price fluctuations. According to data from Coinglass, Bitcoin has seen a total liquidation close to $23 million. Within this, buyers have liquidated approximately $10.2 million, while sellers have liquidated about $12.8 million in positions.
Following the approval of spot Bitcoin ETFs last week, the price of Bitcoin is currently trapped within a narrow band, indicating a sense of uncertainty and hesitation among investors.
As of January 16, the value of BTC has been hovering between $41,500 and $43,000. This ongoing consolidation is occurring despite an earlier effort at a breakout this month, where Bitcoin momentarily soared to over $49,000 before retreating back to its present range.
Current on-chain metrics suggest that BTC price is set to face another wave of selling pressure. According to CryptoQuant, a significant indicator has emerged, warning investors of potential sell pressure in the upcoming week of Exchange-Traded Fund (ETF) trading. This indicator, known as the Mean Exchange Inflow, has historically proven to be a reliable signal of market movements.
The Mean Exchange Inflow measures the average amount of a cryptocurrency moving into exchanges. The metric is currently trading above 14. An inflow above a certain threshold, identified in this analysis as 7, typically indicates that a large number of investors are transferring their holdings to exchanges, possibly preparing to sell. This movement often brings a downturn in BTC prices as selling pressure increases.
This method, analyzing hourly Mean Exchange Inflow, has been proven over years to accurately forecast market sell-offs. Recently, it indicated another potential sell-off coinciding with the market opening, hinting at possible selling pressure this week.
Key events supporting this trend include the Spot ETF for Bitcoin approval, where the metric predicted significant sell-offs that materialized as trading began. Current market conditions also factor in the Grayscale Bitcoin Trust (GBTC), where increased fees might lead to additional selling, taking longer for the market to stabilize.
What’s Next For BTC Price?
Bitcoin’s consolidation below its moving averages at $43,300 suggest a rising selling pressure near higher levels. However, buyers continue to defend a decline below $42K, suggesting a robust accumulation near that region. As of writing, BTC price trades at $43,041, suggesting an increase of over 0.9% from yesterday’s rate.
The 20-day Exponential Moving Average (EMA) at $43,110 has begun to decline, while the Relative Strength Index (RSI) aims to surge above midline, pointing to a marginal advantage for the bulls.
Should there be a recovery, it’s likely to encounter resistance at the 20-day EMA. A downturn from this level would suggest a change in market mood from purchasing during dips to selling during rallies. This could lead the BTC/USDT pair to drop towards $40,000 and possibly test buyers’ patience at $38K.
On the other hand, if buyers manage to break through the $44,000 barrier, it could indicate an end to the corrective phase, setting the stage for the pair to aim for the key $48K-$50K mark by the month’s end.
