One concerning trend is that the volume of Bitcoin has been stagnating along with its price, apart from the “Elon pump” on Jan. 29. This trend shows that there is an overall drop in buyer demand since the $42,000 top despite BTC hovering in the low $30,000 region.
According to Cointelegraph, on Jan. 29, the price of Bitcoin rose to as high as $38,461 on Binance after Tesla CEO and the world’s richest man, Elon Musk, ostensibly showed support for Bitcoin.
Nonetheless, before this rally, on-chain analysts were already warning that the momentum of Bitcoin was slowing.
For instance, the CEO of CryptoQuant, Ki Young Ju pinpointed the high selling pressure from Bitcoin miners as a sign of a short-term bearish scenario.
Although the price of Bitcoin briefly surged 14%, it snapped back down to sub-$34,000 within 24 hours. Therefore, weakening on-chain indicators were likely a warning that BTC would retrace most of its “Elon pump” gains.
Ki wrote before the rally:
“Exchange Whale Ratio hit the eight-month high, meaning $BTC might have a large red candle if the price drops. It’s supposed to be below 85% if this bull-run is legit. Otherwise, it’s likely to be a bull trap.”
Whales likely sold as the price of Bitcoin abruptly surged to the $38,000 resistance level, causing a sharp correction.
With shaky on-chain indicators and some selling pressure coming from miners, traders are also showing caution about longing BTC/USD in the near term.
A pseudonymous trader known as “Salsa Tekila” stated that he is not using leverage until Bitcoin breaks out or drops back to $30,000. He stated:
“We’re at that point where $BTC is far enough from the 30k for me not to be comfortable longing with any form of leverage but at the same time I wouldn’t short. Therefore, being spot long until a big down / legacy open / probably Monday morning is best. NO LEVERAGE”
At the same time, another famous pseudonymous trader known as “Byzantine General” claims that the rally is broken. Thus, even if Bitcoin is bullish in the macro picture, more downside is possible until it sees a convincing breakout on lower time frames. He said:
“The bull run is still on IMO, but the rally is broken. If we re-claim the yearly TWAP we can continue ze pump, but until then it looks kinda meh.”
Traders and technical analysts are closely observing Bitcoin’s reaction to the $34,500 to $35,000 range.
If Bitcoin breaks out of it with strength, momentum, and high volume, then the probability of a short-term trend reversal rises.
Nonetheless, if Bitcoin struggles to retest the $34,500 resistance level and continues to stagnate in the $33,000 region, the risk of a further breakdown to the $33,000 support remains.