Bearish view
- Sell the BTC/USD pair and set a take-profit at 38,000.
- Add a stop-loss at 42,000.
- Timeline: 1-2 days.
Bullish view
- Set a buy-stop at 40,300 and a take-profit at 42,000.
- Add a stop-loss at 38,000.
The BTC/USD pair came under intense strain as a sea of red spread in the crypto market. Bitcoin was hovering below the crucial support at $40,000. It has retreated sharply from this month’s high of $49,080.
Bitcoin ETF enthusiasm fades
Bitcoin has crashed hard as the recent ETF inflows failed to offset the selling pressure. The most recent data shows that there is institutional demand for these ETFs as over $6.5 billion was allocated in the first week of trading. That was a higher figure than what most investors were expecting. It was also higher than inflows in other ETFs.
The ongoing Bitcoin crash is primarily because of investors who are selling the ETF news since the coin jumped from below $20,000 in 2023 to over $40,000 as it became clear that the SEC would approve the funds.
The crash also happened as signs of rotation from crypto to stocks emerged. The key American indices like the S&P 500 and Nasdaq 100 continued surging on Monday. They rose by more than 100 points, reaching their highest levels on record.
Historically, there are times when crypto investors move from their coins to high-flying stocks like Meta and Nvidia.
Still, several catalysts could push Bitcoin higher soon. First, from a technical perspective, Bitcoin could rebound because it is getting oversold. Second, there is a likelihood that the Federal Reserve will start cutting interest rates this year. In most cases, Bitcoin tends to do well in such an environment.
Finally, Bitcoin halving is set to happen in April. Halving will lead to fewer block rewards, which will lead to more Bitcoin scarcity in the near term. Bitcoin tends to do well ahead and after the halving event happens.
BTC/USD technical analysis
Bitcoin continued its strong sell-off in the overnight session as concerns about the industry continued. It moved below the important support at $40,000 and reached its lowest point since December 4th. It also crashed below the key support at $40,548, its lowest point on January 3rd and December 18th.
On the 4H chart, the BTC/USD pair remains below the 50-period moving average while the Relative Strength Index (RSI) and the Stochastic Oscillator has moved to the oversold level.
Therefore, the outlook for Bitcoin is bearish, with the next point to watch being at $38,000. In the longer term, however, there is a likelihood that it will bounce back and retest the year-to-date high of 49,080.
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