Bitcoin is approaching a decisive moment on the chart, one which would dictate how the broader market functions throughout the rest of January. With BTC within a constant decline since November 2021, all eyes would be on whether bulls can successfully defend $40K moving forward.
Bitcoin 4-hour time frame
As highlighted in an earlier article, Bitcoin has been inching closer to the neckline ($40K) of a head and shoulders amidst steady trading outflows. Buyers have sought to delay the attack but a resistance trendline (T1) has undermined multiple recovery attempts made last week. With a move to $40K looking inevitable, bulls were running short on time.
A last ditched effort at the neckline might be able to lift BTC once again, but bulls would need to get past the Simple-Moving Average 20 (red), 50 (yellow), and the T1 trendline to assert any kind of counterpressure. The next point of contact would be made at $44,200 and the T3 trendline, from where $45,000 and $47,400 (T2 – resistance trendline) can be targeted.
On the flip side, investors must prepare for a steep drawdown once BTC registers a daily close below $40K. If no pushbacks are offered at $37,300, losses would likely stretch to $35,000 and then $31,000. From there, BTC demand zone between $30,000-$28,000 would become responsible for a market recovery.
The bearish outcome would go hand in hand with Mike Novogratz’s take on wider market conditions. The crypto billionaire anticipates that cryptocurrencies and the US stock market would continue to be pressured if the yield on 10-year Treasure Notes meets his logical target of 2%. The rate of return on 10-year Treasure Notes currently sits at 1.893%
Recently, markets around the world have been jittery following the Federal Reserve’s hawkish take on the US economy. To combat rising inflation, policymakers are expected to increase interest rates, which in turn, could weigh on volatile assets such as Bitcoin.
Conclusion
Bitcoin’s make-or-break moment is just around the corner. Should BTC defend $40K, expect trading inflows to pour right back into the crypto market. On the flip side, brace for a steep correction if BTC slips below $40,000-$38,000.