- Bitcoin is likely to bounce out of the $41k support zone.
- Market sentiment tilted in favor of the sellers and the MVRV ratio continued to decline.
In a recent post on X, data provider Santiment noted that there was a bearish shift in sentiment around the time of the Bitcoin news [BTC] spot ETF approval helped mark a local top. The 16.9% price drop from last week’s high to the $40.6k level was accompanied by a shift in market sentiment.
AMBCrypto looked at some Bitcoin metrics and its liquidation levels to figure out whether a bullish reversal or a bearish continuation is more likely.
The MVRV ratio falls below the low seen at the end of October
During the October 2023 rally, Santiment’s 180-day MVRV ratio shot up. On December 6, it peaked at 37.88%. This indicated a potentially overvalued asset. Since then, the benchmark has been in decline.
A few days after the approval of the spot ETF, on January 13, it fell below 17.66%. BTC’s MVRV was previously at this point on October 28.
At the time of writing, it stood at 10.88%, which was still positive, but it indicated that holders were increasingly choosing to sell some of their BTC holdings.
![Bitcoin rebounds 16% after spot ETF approval as sentiment hits rock bottom](https://statics.ambcrypto.com/wp-content/uploads/2024/01/MD-2-BTC-santiment-1.png)
Source: Santiment
Weighted sentiment hit a six-month high between January 9 and 11, but has fallen dramatically since then. It was a similar story for Bitcoin social volume. This suggested that the short-term hype had died down.
The ETF approvals led to a sell-the-news event, from which the market has yet to recover. The Open Interest has been declining since December 5. The short peaks in the intermediate period were accompanied by short-term price breakouts, which were quickly corrected.
The accumulation of whales showed that long-term investors still have hope
BTC supply distribution analysis showed that addresses holding 10,000 to 1 million BTC continued to increase their holdings over the past two months. Meanwhile, the 0-100 BTC holding addresses started selling in the first week of January.
![Bitcoin rebounds 16% after spot ETF approval as sentiment hits rock bottom](https://statics.ambcrypto.com/wp-content/uploads/2024/01/MD-2-BTC-supply.png)
Source: Santiment
Once again, this activity indicated that some holders were choosing to take profits as BTC approaches the 50,000 mark.
Traders could hope for another recovery from the $41,000 mark
Since December 11, BTC has tested the lows of the range at $40.6k six times. Each of them saw a rebound of different magnitudes. Although BTC has a bearish structure and downward momentum, the chances of a recovery were there.
This was also why the reach remained remarkable, despite the two outbreaks in recent weeks. They were quickly reversed and the levels within the range remained meaningful.
![Bitcoin rebounds 16% after spot ETF approval as sentiment hits rock bottom](https://statics.ambcrypto.com/wp-content/uploads/2024/01/MD-2-BTC-price.png)
Source: BTC/USDT on TradingView
A drop below $40.2k would invalidate the idea of a bounce. The OBV can also help debunk this idea. At the time of going to press, the index remained stuck at the lower support level at the end of October. A drop below that would show that sellers remained dominant.
In this scenario, BTC would likely slide towards the next support zone at $37.5k.
AMBCrypto also looked at Hyblock’s liquidation level data. Our conclusion is that the market is too heavily in favor of the bears to withstand the decline.
The liquidation levels of $42.4k and $44k are $181 million and $143 million respectively.
![Bitcoin rebounds 16% after spot ETF approval as sentiment hits rock bottom](https://statics.ambcrypto.com/wp-content/uploads/2024/01/MD-2-BTC-hyblock.png)
Source: Hyblok
The Cumulative Liq Levels Delta was also hugely negative, showing that short liquidation levels far exceeded long ones.
Read Bitcoin’s [BTC] Price forecast 2024-25
Therefore, a jump to these two levels is possible.
In particular, the $42.4k and $44.3k levels are ones to watch out for. They are the middle class and the high resistance respectively.