Bitcoin has hovered around its ascending support line since mid-April after failing to secure enough buying volume to trigger a healthy bounce-back. Its performance over the last 5 days confirmed that as it finally broke through the support line for the first time this year.
Bitcoin has been trading within an ascending support and resistance range since January 2021. It has remained within that range, despite multiple breakout attempts. However, performance over the last two weeks failed to maintain the same buying vigor as it previously did every time the price interacted with the support line.
BTC’s bearish performance in the last 5 days yielded more downside which extended further below the support line. It pushed below $40,000 once again as more FUD flowed into the market.
However, heavy accumulation between $39,000 and $40,000 has so far prevented more downside. To some extent, it had resulted in an upside of 0.83% to $39,786, at the time of writing.
Potential for more downside?
A breakout below the support level might be interpreted as an indication of bearishness ahead. This aligns with the FUD and expectations that the market might continue with its bearish performance. In fact, some speculate that BTC’s price might dip below $20,000. Such an outcome would require a massive sell-off, especially from institutions.
Some of the biggest institutions that own Bitcoin are still holding it. Among them is EV manufacturer Tesla which recently confirmed through its Q1 2022 earnings report that it still owns BTC worth $1.26 billion and does not plan to sell soon. Grayscale also has Bitcoin in its portfolio and has plans to include other cryptocurrencies. Terra too recently announced plans to spend billions in a Bitcoin buying spree.
Bitcoin’s floor price is unlikely to go much lower if major institutions are buying. BTC’s on-chain metrics also align with what the institutions are doing. For example, BTC’s exchange balance metric shows that BTC has been flowing out of exchanges.
Meanwhile, BTC Options’ Open Interest metric has risen significantly since 17 April.
Source: Glassnode
BTC exchange balance and Options Open Interest suggest that Bitcoin might be building up bullish pressure. And, this might explode any day.
However, there is still significant possibility of some short-term downside as the market shakes off weak hands.
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