The market is entering a “wait and see” phase as Bitcoin struggles below $ 40,000

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Price action for Bitcoin (BTC) and the broader cryptocurrency market was relatively subdued on May 27 as nervous traders aren’t sure what to do next after last week’s market slump that wiped out leveraged traders as BTC went up to $ 30,000 fell before the price recovered.

Data from Cointelegraph Markets Pro and TradingView show that while the price of Bitcoin has hit higher highs and higher lows over the past week, the bulls continue to face stiff resistance on any meaningful attempt to break above $ 40,000, as bears do so psychologically defend important level.

BTC / USDT 4-hour chart. Source: TradingView

For many traders, the recent correction has likely sparked PTSD-like flashbacks of the 2017 and 2018 market crashes and the two-year crypto winter that followed, and this could be one reason the market seems undecided at the moment.

Since many traders are unsure of what might come next for the price of Bitcoin, it is wise to consider the various bullish and bearish scenarios that could play out, as well as the opinions of analysts in the sector.

Traders remain cautious after the recent sell-off

According to David Lifchitz, managing partner and chief investment officer at ExoAlpha, it is important to look closely at recent market events and review the triggers for the current situation.

Lifchitz told Cointelegraph that after “an almost uninterrupted bull run from $ 10,000 in October 2020 to an all-time high for BTC of $ 65,000 in mid-April 2021”, the market is seeing multiple waves of profit-taking ahead of the “big deleveraging in 2021” got ”, causing the price of BTC to drop 54% to $ 30,000 while Ether (ETH) and Altcoins were hit even harder.

According to Lifchitz, the correction made it possible to “drastically reduce the leverage prevailing in the ecosystem”, which can be seen as a healthy development for the market as a whole, as it will help “build on a more stable basis”.

Estimated Leverage Ratio for Bitcoin. Source: KryptoQuant

Lifchitz warned that while the data shows that some early Dip buyers have managed to acquire tokens near the lows, both the volume and open interest of the futures have remained weak and “show no urgency to reload” .

The monthly expiration of the options for Bitcoin and Ether is less than 24 hours away, and Lifchitz believes they stand in the way of “any meaningful move in the short term”. He also suggested that due to the lack of upward catalyst and the recent reminder that “prices don’t always go up”, “it will be difficult to convince burned investors to come back into the game immediately”.

This has put the market into a “wait and see” phase, according to Lifchitz, in which both trend followers and contrary investors “need to see some movement, either up or down” before entering the market.

Liftchitz said:

“The market definitely needs a catalyst, either up or down, to move forward. Too long without a catalyst could cause investor fatigue, who may decide to cash out and seek other grazes, which would act as gravity on cryptos and cause a downward movement. The next days / weeks will be very enlightening as to what to expect next. “

Bullish indicators abound

While the average crypto trader is currently in a state of stasis, waiting for the next big market move to signal what BTC might do next, on-chain data suggests bullish moves from bigger players, the most recent Take full advantage of the decline through purchases.

According to Micah Spruill, managing partner and chief investment officer at S2F Capital, most of the sales posted at its recent lows came from “newer entrants” who “have sold at a loss and appear to be exhausted at this point.”

Speaking to Cointelegraph, Spruill pointed out the net transfer volume of BTC, which shows that after the bearish downturn between May 17 and 20, “massive amounts of USDC and USDT were sent to the exchanges (to allocate BTC, ETH, etc.) buy) and move them to long-term storage. “

BTC net transfer volume to / from all exchanges. Source: Glass knot

Another analysis shows that retail wallets with a content between 0.1 and 1 BTC as well as whale wallets with a volume between 1,000 and 10,000 BTC have accumulated at these levels in preparation for an overall surge.

Another bullish indicator mentioned by Spruill is net company growth, which could “recover to previous levels” and signal that “the bull market is back in full swing” if this trend continues over the next few weeks and the metric returns to its own Highs reached.

Business net growth for Bitcoin. Source: Glass knot

Overall, Spruill sees positive development for BTC in the future, although the timing is questionable due to various factors.

Spruill said:

“I think there is a chance that we could spend an extended period (months) between the $ 30,000 to $ 42,000 levels as the market digests recent events and we endure a mid-cycle replenishment phase. Alternatively, it is possible that we may have a COVID-like recovery where we will see Bitcoin soon break outside of this range and recover much faster than others expect. “

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every step of investing and trading involves risk and you should do your own research when making a decision.