Bitcoin $42,000 support under pressure as short position inflows surge
Bitcoin (BTC) recently experienced a sharp decline, plummeting to $40,000 amid a widespread sell-off across the cryptocurrency market. The most important token has recovered some of its losses and is now trading 4% lower at $42,000, but concerns remain about the possibility of further price downside action before a potential recovery. Investors are paying close attention to the inflow of BTC short positions. According to a recent CoinShares report, digital asset investment products saw inflows for the 11th straight week, totaling $43 million. In particular, short position inflows have increased significantly recently due to rising prices and awareness of downside risks. Europe leads with $43 million in inflows, followed by the United States with $14 million (half of which are short). On the other hand, Hong Kong and Brazil experienced outflows of $8 million and $4.6 million, respectively. Related Reading: Avalanche Makes Top 10 Rankings with Weekly Gains of 61% The Scoop is as follows: Bitcoin remained the main focus for investors, attracting $20 million in inflows, taking annual inflows to $1.7 billion. Short-Bitcoin positions saw inflows of $8.6 million, suggesting that some investors view the current price rise as unsustainable. Ethereum (ETH) also saw increased interest, recording inflows totaling $10 million in week 6, a reversal from previous outflows. Selling pressure mounts as miners reduce Bitcoin holdings There are signs that miners are selling their Bitcoin holdings following the recent price drop, according to Satoshi Club. Data shows that miners’ BTC holdings have declined significantly as flows to exchanges have increased, suggesting selling pressure in the market. Satoshi Club’s analysis highlights that this trend will result in miners’ rewards being halved, with the halving expected in 2024. Additionally, Bitcoin’s net unrealized P&L, a measure of investor returns, exceeded 0.5 for the first time since December 2021. This means that a significant portion of Bitcoin investments are currently profitable, and selling pressure is likely to increase at current high prices. . BTC’s bullish structure is intact, but deep correction threatens downside On the Bitcoin 1-day chart, the current trading price is closely aligned with the support level. Despite briefly falling below this level, Bitcoin recovered and traded above this level, mitigating further declines. However, if selling pressure continues and the current price level cannot be maintained, the next important support level for Bitcoin will be at $39,990. It is worth noting that during previous periods of hype surrounding Bitcoin’s milestones, many traders entered long positions below current levels. This influx of long positions could trigger a liquidation hunt before a recovery occurs. If such a scenario unfolds, the pursuit of liquidations could push the price of Bitcoin further lower, potentially testing support levels at $38,700 and $37,800. Related Read: Why Did Ethereum Price Drop to $2,200 Today? On the positive side, Bitcoin’s current bullish structure will likely remain intact unless a significant correction occurs, causing the price to fall below the $29,900 level. This level kicked off Bitcoin’s current bull run in late October. Future outcomes will depend on whether Bitcoin can successfully hold on to the nearest support level and whether it can shift its focus from hunting long positions to hunting shorts, ultimately fueling a recovery that reclaims previously conquered territory. Featured image from Shutterstock, chart from TradingView.com
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