Bitcoin (BTC) fell to lows of $28,732 on Jan. 22 before quelling further downside moves. Explaining the sudden drop in Bitcoin prices, several factors, including the Tether (USDT) controversy as well as the dollar’s recovery, have been touted as the main causes of the downturn.
Given Tether’s perceived impact on Bitcoin (BTC) price growth and the extent of its daily use by cryptocurrency traders, some fear a negative outcome on behalf of iFinex Inc, Tether’s parent company could lower the price of BTC and the rest of the cryptocurrency market.
In response to a tweet from CryptoQuant CEO Ki-Young Ju stating “If SEC’s next target is Tether, it’s going to be very, very bad for this bull run as this market heavily relying on $USDT.” Paolo Ardoino, CTO of Bitfinex, took to Twitter to allay fears that Tether could be the next target of the SEC.
Recent data from CryptoQuant showed that huge churns from Mining pools over the past few days, which coincided with the BTC correction, could be one of the reasons for the downside volatility.
Meanwhile, Bitcoin exchange balances have remained flat throughout January, in contrast to the overall declining trend according to data in effect since June 2019.
BTC/USD Daily Chart
Bitcoin presently trades up at $33,555.
Indicators and Analysts Have This To Say on the Markets
When Bitcoin (BTC) price dipped below $29,000, the investor sentiment changed to that of a cautious approach. On January 22nd, the Crypto Fear and Greed Index plummeted to 40, shifting market sentiment away from “Extreme Greed” to “Fear.” The index fell to this low level for the first time since October 3, 2020, when Bitcoin was trading below 11k.
The Crypto Fear and Greed Index is an indicator of the two main emotions that affect how much investors are willing to buy a cryptocurrency like Bitcoin, with extreme fear levels signaling a high measure of uncertainty among investors.
Before the drop to low levels of fear, the Crypto Fear and Greed Index hit highs of 95 on January 6, indicating extreme greed as Bitcoin hit a record high of $41,986 on January 8.
When Bitcoin saw a drastic move to lows of $28,732 on Jan 22, market participants bore their minds on BTC price action. Their opinions were however mixed as some maintained bullishness since the last three times Bitcoin price fell below $32,000, an extensive rally of up to 30% followed.
Scott Minerd, chief investment officer at Guggenheim puts BTC near term bearish call at $20,000. The exec still believes that Bitcoin will hit $400,000 in the long-term, but not in 2021. On the contrary, Mike Novogratz, CEO of Galaxy Digital, was confident that Bitcoin will rally again. He tweeted, “Humans aren’t meant to live in 150% vol environments. That was the tell. When vol recedes will we bottom, base, and resume the rally.”
Currently, short-term charts show that Bitcoin is still flirting with the bearish territory, but several derivatives indicators and the flow of leading traders are reflecting neutral or bullish levels. Data shows that top traders at OKEx are actively buying in the downturn, and the futures premium remains in an optimistic range.
Top traders at OKEx have been long since January 19, bringing the indicator from 0.96 (slightly net short) to 2.49 in favor of long positions which is the highest level in 30 days. Top traders on Binance have averaged 21% in favor of long positions within the said timeframe.
On the other hand, top traders on Huobi have averaged a 0.91 long/short ratio over the past 30 days, favoring net short positions of 9%.
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