21.01.202214:58 Forex Analysis & Reviews: Bitcoin Updates Six-month Low, Gets One Step Closer to Bear Market

Bitcoin was one step away from the coveted breakdown of the mirror level and the downward trend line. But as we expected, the lack of large volumes of purchases and the general fear in the market played against the asset. As a result of an unsuccessful assault on the downward trend line, the cryptocurrency fell like a stone to the lower border of the range at around $40.5k. The bulls failed to defend this milestone as at the beginning of the week, and the asset continued its impulse decline.

The main cryptocurrency has updated its six-month low at $39k. As a result of the collapse of Bitcoin, the altcoin market also moved into the red zone. The total capitalization of the crypto market decreased by 7.5%, and the total volume of liquidations reached $727 million. Large sales started in the $42k area as evidenced by the long upper wick. As of 09:30 UTC, the asset continues to trade below $40k, and in order to level out the negative scenario, buyers need to push the price above $40k. Otherwise, the price drop will continue.

The main problem at the current stage is the breakdown of the upward trend line, which played the role of a strong support zone. Now this line has become an important zone of resistance, over which it is necessary to gain a foothold in the near future. Bitcoin is in limbo, as it rests on the fading faith of the bulls. In case of consolidation in the range of $39k-$40k, the minimum target for the fall will be $36.7k. The next key BTC support zone will be $30k.

The sharp drop in the price of Bitcoin rejects all parallels with the May accumulation. The positions of the bulls in mid-2021 and now are incommensurable. The accumulation period continues, "whales" are actively buying up coins (40k BTC over the past week), the number of "weak hands" reaches an absolute minimum, and the bitcoin hashrate is growing. But at the same time, the price continues to decline and increasingly correlates with the stock markets.

Bitcoin is at the stage of forming a new segment of the cycle, and therefore any long-term analysis does not make sense. The asset is moving to a new stage of development and its functionality in the eyes of investors is changing.

Bloomberg strategist Mike McGlone believes that the main cryptocurrency has great potential for growth in 2022 due to the fact that the asset is gradually changing its status. I assume that the current correction is part of the process of reorienting Bitcoin and its assimilation with class assets. The correlation with the S&P 500 and other key indices confirms this. But how positively this will affect bitcoin in the future is a big question. Right now, the cryptocurrency is one step away from a bear market with potential in the $20k region.