The price of Bitcoin fully retraced after surging to around $38,000 in the past 24 hours. BTC initially surged after Tesla CEO Elon Musk put the word “Bitcoin” in his Twitter bio.
Since then, BTC has dropped back down to around $33,000, hovering just below $34,000 in the last few hours.
Will Bitcoin recover soon?
After the drop from $38,000 to $33,000, Bitcoin has been consolidating since with no real direction to either the upside or downside.
“Think there’s a decent chance of BTC popping up here through the weekend. Hourly looks like straight accumulation. I unhedged/rebought some spot here. Staying off of derivatives for now as weekends can be choppy.”
Another pseudonymous trader, known as “DonAlt,” also explained that Bitcoin could see a large upside movement if it moves above $34,000.
“Momentum plays on the bull side got utterly rinsed when the Elon Musk bio change didn’t lead to much, and then continuation plays on the bear side got chopped. I’m watching the range below (green zones), any close through the boundaries and I’d expect a sizeable jump.”
However, until Bitcoin sees a clear breakout above the near-term resistance level, analysts anticipate more consolidation.
“Haven’t updated this in several weeks. $BTC HTF thesis. Zoom out. It’s all going to be okay anon.”
Why BTC is stagnating
Before the initial rally to $38,000 occurred, there was a confluence of many on-chain indicators that showed a rather bearish trend.
The selling pressure from miners was rising and whales were depositing lots of BTC into exchanges. The combination of the two factors meant that the external selling pressure on Bitcoin was high.
This could have been the reason why Bitcoin likely rejected from the $38,000 resistance level. Many traders said that Bitcoin would have to reclaim $38,000 to confirm a bullish short-term trend reversal.
Although Bitcoin briefly rose above $38,000, it struggled to remain stable above it. This meant that BTC was vulnerable to a quick correction, as it saw a rapid upsurge to the $38,000 area.
Within hours, BTC fully retraced, dropping below $33,000 at the day’s bottom on January 30.
In the foreseeable future, there is a high probability that Bitcoin would consolidate with low volatility. This would likely result in altcoins and DeFi tokens seeing high volatility and significant upside potential.
In the meantime, the key would be the inflow of stablecoin deposits into cryptocurrency exchanges, which would signal the entry of sidelined capital.