Bitcoin is trading at $116k at the time of writing after dropping lower a few hours ago. It recovered and is shaping up to erase all the losses it incurred on Monday.
The apex coin opened trading at $117,456 and dropped to a low of $114,706. The 4-hour chart shows that the downtrend started late on Sunday and continued until noon on the present day. Nonetheless, its recovery above $116k suggests an increased effort by the bulls to halt the ongoing downtrend.
A bearish close on Monday will result in the asset continuing its Thursday downtrend. It is worth noting that the second half of the previous week was bearish. As a result, it ended the session with slight losses.
A closer look at how prices performed during this period offers insight into what is happening at the time of writing. Reports from CryptoQuant noted that while many investors sold off their assets, one group has triggered alarms.
Traders who held BTC for 3 to 5 years joined the frenzy. They sold off 31,968 BTC on Aug 16. While the 1-day chart shows that the bulls absorbed the excess supply, such selling may mark the start of something big.
A similar event happened on Jan 24, 2024, when they sold over 95k BTC. The asset saw fresh buying and surged higher. This means that the selling signaled the bottom of the downtrend at the time. However, the massive dump from this group of investors is not always bullish as a similar move in marked a local top.
In other cases, the group selling precedes a continuation of further declines. There is no definite direction as to how prices will react after this group sells. Nonetheless, it is undeniable that something big follows it.
Is the Downtrend Over?
Onchain data suggest that the downtrend is not ending soon. The exchange reserves are increasing following a massive influx into trading platforms. They registered inflows exceeding 20k BTC in the last 24 hours. The asset investors moved into these platforms were over 1500 higher than the outflow, resulting in a supply shock.
Nonetheless, the rise in the reserves indicates that the bulls are yet to absorb the excess supply. They must soak up the excesses to guarantee further increases. If current conditions remain the same, the downward trend will continue.
Data from Coinglass indicates a drop in investors’ confidence over the last 4 hours. It is worth noting that before the current 4-hour period, the apex coin saw significant long positions. While they were lower than the shorts, it was not as it is at the time of writing. Short positions made up almost 60% of currently open trades.
Bitcoin Eyes $112k
With the current data in view, Bitcoin may continue its downtrend if trading conditions remain the same. The Fibonacci retracement level shows the apex coin trading above the 50% mark after it briefly slipped below it.
The bulls must sustain trading above this mark, as a drop will see it test the 61% level. This will mean a drop to $112k in the coming days.
Conversely, a change in fundamentals will see Bitcoin surge. The indicator points to the 38% fib level as the next level to watch. The mark is critical as it has served as a launchpad for an attempt at $120k.
