Key Points
- Despite bearish short-term indicators, accumulation uptick might signal a recovery for Bitcoin.
- Increased accumulation and short-term holders at a loss could lower sell pressure and increase recovery chances.
Bitcoin [BTC] was trading at $94.5k at the time of writing. This was following its third rejection at or above the $100k zone within a month.
This has led many to speculate on whether this dip will result in a full-blown downtrend and a new bear market.
Market Sentiment and Indicators
A post from Santiment Insights showed that the crowd selling social volume was significantly stronger on 08 January. The last time this was observed was on 04 December, when the price rebounded and hit the $108.3k all-time high.
The 8% drop since Tuesday indicates prevailing fear in the market. However, a liquidity sweep below $92k or a “Trump pump” post inauguration could potentially trigger a recovery.
Buy the Fear, Sell the Greed
The well-known saying holds true in some cases. On-chain metrics for Bitcoin do not yet indicate a market top.
The weighted sentiment for BTC and ETH showed that traders and investors had a bearish outlook on the market since the price drop on 19 December. Neither asset has recovered in terms of price so far.
The 30-day MVRV ratios for both leading crypto assets were also negative, suggesting that BTC and ETH short-term holders were at a loss.
Interestingly, the 180-day mean coin age for both assets began to trend higher over the last three weeks. This could be interpreted as a signal to buy the dip.
Increased accumulation and short-term holders at a loss could mean reduced imminent sell pressure and increased chances of a recovery.
The Open Interest (OI) had been trending higher from the start of November to mid-December. However, there has been a slight drop since then.
The OI has fallen from $13.7 billion on 16 December to $11.72 billion at the time of writing. This drop in OI is another sign that speculative interest has been waning, reinforcing short-term bearish expectations.
By the time these short-term indicators turn positive, the price of Bitcoin might already have begun its recovery.
Traders need to balance risk and opportunity and decide whether they want to enter above the $92k support.
