Following the SEC’s official approval of 11 spot Bitcoin ETFs on January 11, the price of Bitcoin reached its highest level in two years, rising to almost $48,500. However, despite the expected further increase in the rate, the bullish trend did not hold, and prices began to decline, reaching by January 18 levels below $42 thousand. Thus, the Bitcoin rate has adjusted to December values. On Sunday, January 21, Bitcoin (BTC) was trading at $41.6 thousand, its price had fallen by 3% since the end of the previous week. Our recognized expert in the cryptocurrency market, Konstantinas Sizovas, analyzed the situation on the market and told us what it might look like in the Bitcoin exchange rate for the next seven days.
In the past week, Bitcoin dynamics were determined primarily by the external background – the US dollar, stock indicators and decisions of crypto market regulators. After a sharp drop on January 12, the price of Bitcoin consolidated in the range of $41,500 – $43,500 for five days. On January 16, a local maximum was reached at $43,578. However, the excitement around the launch of a Bitcoin ETF in the United States did not lead to sustainable growth. Pressure remained amid the strengthening of the dollar, negative dynamics of stock indices and the continued outflow of funds from the Grayscale fund. Only from January 11-17, $1.624 billion was withdrawn from Grayscale. On Friday, January 18, the BTC/USD pair closed with growth. The price increased by 0.80%, to $41,659. At the beginning of the American session, the Bitcoin rate dropped to $40,280. Sellers tried to pass the support of $40,500, but it did not work. Buyers were supported by two factors: a decline in the dollar index and an increase in stock indices. By the close of the day the price was in positive territory. At the same time, all 11 Bitcoin ETFs showed an increase of about 2%.
At the time of writing, Bitcoin is worth $41,608. Again, the price may trade above the key support of $40,500 until February 6th. The downward movement from $48,969 to $40,280 has a three-wave formation. This means the price could return to $44,300 by January 23rd. A return to it will not be a signal to buy Bitcoin. The probability of a price reduction to $38,500 by February 10 is more than 75%. According to our conservative estimates, the market is in a decline phase, which will end on February 10th. Buyers had to go above $50 thousand before January 8th. Now we need to again form a springboard for a new rally before the halving in April. Trading volumes for spot Bitcoin ETFs are good, but the outflow from the Grayscale fund is very large, which makes many investors nervous.
It is likely that until February 10, the trading range of $40,000 – $44,500 with an upward bias will remain. Then the probability of a fall to $38,500 will be greatly reduced. According to BitRiver forecasts, buyers need to pass the $44,500 level to level out the bearish sentiment. It is necessary to follow news on ETFs, the dynamics of the dollar index and the S&P500. Among the key events this week that could affect the dynamics of the dollar and cryptocurrencies: the publication of data on US GDP (January 25) and inflation in the US (January 26). Despite Friday’s decline, the US Dollar Index (DXY) ended the week in positive territory as US bond yields rose and the likelihood of rate cuts in March and May diminished. According to the CME FedWatch Tool, the likelihood of interest rates cutting in March and May is 46% and 51%, respectively, versus 76.9% and 17% on January 12. Bitcoin is a risky asset and is therefore sensitive to the DXY value. Therefore, it can also be assumed that in the near future a bearish trend will prevail in the volatile market, and the price of Bitcoin will gradually decline, adjusting to the levels of mid-2023.
Also on January 18, the SEC postponed the decision on applications to launch Ethereum-ETF to March 5. This disappointed investors and prompted a renewed decline. On this day, BTC dropped to $40,630, and at the end of the day lost 3.4%, falling to $41,327. However, there is potential for growth in prices for altcoins, due to the flow of capital from investors who took profits due to rising prices for Bitcoin 9 -January 11, into alternative cryptocurrencies in order to diversify risks and await the approval of Ethereum-ETF. There may not be an explosive growth in sales volumes after the approval of the Ethereum ETF, but expectations of this event may contribute to the formation of a sustainable bullish trend in the altcoin market. Moreover, this expectation is supported by a statement from BlackRock CEO Larry Fink, who said that he sees benefit in creating an Ethereum-ETF, as it is a step towards future tokenization. That is, in general, despite the current correction, cryptocurrencies are expected to again attract the attention of investors in the spring of 2024, supported by favorable events and changes in the economic environment. The first reduction in the US Federal Reserve’s key rate will lead to increased investor interest in purchasing assets with high profitability potential. This reallocation of investment capital between government securities and riskier assets such as cryptocurrency will allow investors to hedge risks associated with slowing US economic growth and lower inflation.
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