After the collapse caused by Terra (LUNA) on May 12, Bitcoin (BTC) price is consolidating above the weekly support level. This price action could trigger a downward move for BTC, further deepening investors’ fears.
Bitcoin price may indicate a deeper decline
As we reported on Kriptokoin.com, the price of Bitcoin broke out of a bear flag pattern on May 6, climbing around 36 percent in a week. led to the collapse. BTC fell from its all-time high of $69,000 to $32,837 between November 10, 2021 and January 24, 2022, forming the flagpole of the model. Meanwhile, the consolidation in the form of higher lows and higher highs from Jan 14 to May 22 formed an ascending parallel-like pattern known as the flag. This technical formation predicts a target of $18,179, which was confirmed the moment the Bitcoin price fell below $38,305.
So far, the sell-off pause has allowed Bitcoin price to consolidate around $29,147, just above the weekly support at $29,100. A daily candlestick close below this support will trigger more declines to the target at $18,179.
On-chain metrics weakening
The decrease in the number of new addresses joining the Bitcoin blockchain supports this narrative of falling BTC price, The 7-day Simple Moving Average of this metric is 620,122′ from Jan 9 to May 26. decreased from 381,857 to 381,857. This 38 percent drop in new active addresses joining the Bitcoin network marks a clear drop in investor sentiment around BTC. Also, the number of BTC held on exchanges has increased from 1.89 million to 1.94 million since May 2. This 2.6 percent increase in supply held at central institutions poses a sell-side threat. In the event of a crash, these holders can panic sell and add more pressure, exacerbating the downtrend. Therefore, this on-chain measurement shows that the odds in favor of the bears are increasing.
Another thing that paints a bearish picture for bitcoin price is the lack of backlog from whales. Interestingly, these high-net-worth investors are dumping their holdings. Wallets holding 1,000 to 10,000 BTC tokens fell from 15,870 to 15,856, representing 14 wallets draining their holdings. This drop reveals that these investors are making profits and also believe that further declines in Bitcoin price are possible.
Bitcoin could make it, retest $69k
While most on-chain metrics are bearish, investors can hold on to one last hope, which is the “dead cat bounce” known scenario. In this outlook, market participants can expect the Bitcoin price to face significant hurdles between $33,000 and $36,000. This move is likely to create liquidity for smart money shorts when the Bitcoin price finally makes a U-turn. However, this rapid rise could be a chance for investors to sell at a much better price, at least until a solid base is formed for Bitcoin.
However, if this increase rises high enough to produce a one-day candlestick above the $53,000 barrier, it will create a higher top from a macro perspective and invalidate the bearish thesis. Such a development will pave the way for marginal buyers to step in, potentially pushing BTC to retest its all-time high of $69,000.
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