Bitcoin (BTC)Goes for Dip Under $40,000
Bitcoin (BTC) held above the $40K range for days, but dipped to $38,796.07 just after the end of a slow-trading holiday weekend. With this, BTC fulfilled the expectations from last week for an extended dip and possibly a deeper correction.
With BTC hovering above $40,000, the opinions are almost equally divided on whether the next direction is bullish or bearish. Even a dip to $38,000 would make a higher low, suggesting BTC can avoid the scenario of extended losses.
But the most bullish factor remains the scarcity of actual BTC. Accumulation is happening as noted both on large-scale whale wallets and for retail buyers. One of the signs is a deep outflow of coins from exchanges, as they are held closely as a valuable asset to protect against inflation.
In the past year, despite fluctuations and a net year-on-year loss, BTC was also extremely useful for moving funds fast. The higher price per coin made that even easier, raising demand for BTC with no incriminating history.
The Lightning Network capacity was also growing all the time. More exchanges are using this tool to move coins, with demand to hold mode coins in nodes. The Lightning Network now carries a reserve of 3,726 BTC, spread over 32,300 nodes. This network, starting off as an experiment, was growing both over bullish and bearish periods.
The exchange balances for BTC are also not only falling gradually, but showing significant coin withdrawals.
Fear of hacked exchange wallets or other restrictions on custodial wallets has been driving the exit from markets. This time, BTC is not bought to flip, but bought for cold storage and possible long-term benefits.
There are even more records of top wallets filling up their reserves. One of the hypotheses is the wallet may belong to a mining pool which holds on to their rewards. The funds held in the wallet are also close to the know balance of MicroStrategy, one of the biggest buyers of a long-term BTC reserve.
The mechanism for acquiring BTC is also accelerated by the growing inflows of stablecoins, which add new liquidity. Some of the stablecoins are not backed by a fiat deposit, but created based on a crypto collateral.
While this creates a risky chain of assetse, in the short term it accelerates the buying opportunities for BTC. In a way, big-scale investors flood the market with dollar-denominated stablecoins, to withdraw potentially more valuable and scarce BTC.
Terra LFG continues to buy BTC, with the latest evidence of adding 3,267 BTC on April 16. With this, the wallet already holds 42,453 BTC and is the 18-th most prominent “whale” address. This is just the start for the Terra project, which plans on spending 10B on purchasing BTC collaterals. On social media, BTC has significant support for its status as deflationary money, instead of using the model of inflationary coins and tokens.
What is the Next Move for BTC
After a potentially slow holiday weekend for European and US-based traders, BTC heads for the end of April. In a historically bullish month, BTC is still at a crossroads between a potential dip to $37,000 and the beginning of a more significant rally.
The potential for attacking leveraged positions is also leading to a slowdown in derivative exchange activities. Liquidations, even with significant price moves, are smaller.
Traders are also still looking for a trend, as the shift in direction wipes out leveraged positions with ease.
BTC is also in the red year on year, distancing itself from the two rallies above $65,000 in April and toward the end of 2021. This time, despite the highs and lows, a record number of coins remain unmoved, awaiting long-term price action.
BTC Couples with Stock Markets
Despite some short-term signs of BTC moving against stock markets, the last few months showed a significant correlation. BTC now behaves like tech stocks, and responds to macroeconomic factors and the signals of the US Federal Reserve on interest rate hikes.
The time horizon for the first Fed rate hikes are in May and June, yet to be experienced in real-time price action for BTC.
Will $40,000 Support Hold
BTC rarely got close or above $41,000 in the past days. The $40,000 BTC support was highly important for the upcoming price moves. BTC traded at $40,207.77 toward the end of the weekend, on slowed-down holiday volumes just above $16B in 24 hours.
With the Crypto Fear and Greed index down to 28 points, BTC is guided by a fearful sentiment. Just weeks ago, BTC cruised on neutral. But fear is not necessarily an indicator of short-term bearishness.
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