Forex Analysis & Reviews: 01.02.2022 - Crypto whales increase long...

01.02.2022 07:45 AM

Crypto whales increase long positions on BTC

Bitcoin has been declining for two and a half months. However, it was able to halt its fall at the end of last week. When the BTC price was moving below the $32k mark, investors switched to the Buy the Dips strategy. As a result, the price made a reversal. Importantly, investors continued to increase the volume of coins, sending BTC to $ 38k.

After a two-month correction, the price reversal impacted noticeably market sentiment. Yesterday, Bitcoin remained at the upper limit of the wide range of $38.8k-$32k. Some traders believe that BTC may resume a rally and approach new highs despite the cautious sentiment. Is it worth waiting for a bullish momentum of the main cryptocurrency in the near future?

The digital asset did not make any sharp swings over the weekend. Trading activity decreased, indicating weak demand on weekends. The lull was associated with the end of the trading week in the stock market, which directly affects BTC quotes. It means that in the current cycle, the cryptocurrency market will be dependent on stock indices and fundamental economic factors.

BTC has the greatest correlation with the S&P 500 index, which reached a significant support zone and managed to jump above it. Bitcoin continues to trade within a wide range, where the mirror level of $38.7k acts as a strong resistance level. Bitcoin is unable to break through this range. Therefore, it is recommended to monitor carefully the movement of the SPX index. If the index does not show clear price movements in either direction, it may signal the beginning of a long-term sideways movement.

The prolonged movement in the narrow channel indicates the start of the accumulation period. Its main feature is low trading activity among speculators. According to IntoTheBlock, the number of BTC addresses with a balance of 1k rose when BTC was falling below $50k. Positions of long-term holders advanced by 5% over the past 30 days. Judging by these factors, investors are likely to retain a long-term optimistic outlook for the crypto market. A similar trend occurred in the summer of 2021whne traders increased their positions on BTC after pessimistic sentiment and exodus of Chinese miners to other countries.

In the period of June-July 2021, the crypto market was in a similar situation. It was overheated due to the beginning of institutionalization and panic triggered by China's crackdown on the crypto market. The price dropped by 52% from the all-time high, declining to $30k. Now, the market dynamic is the same. The crypto futures market is overheated. Traders are extremely cautious. The correction also totals 50%. BTC is trading at $30k. In summer, after reaching the bottom, bitcoin was in a phase of prolonged consolidation, which was accompanied by a surge in the number of addresses from different categories. I assume that this is the beginning of the accumulation phase. For this reason, BTC is likely to trade within a wide range of $38.7k-$30k next month. Its price may either rise or slide down.

When making short-term forecasts, I assume that now, the formation of the fifth upward wave is taking place. This means that by the beginning of March, bitcoin may start to recover, touching new highs. As a result, it is likely to soar to $60k. If it breaks through this level, it will resume a rally with the target levels located in the range of $75k-$80k. Judging by the current movements in the crypto and stock markets it is very risky to open long positions. It is best to end January by averaging positions in bitcoin and a number of attractive altcoins.