Bitcoin (BTC) may have rallied to $44,000 on the back of United States inflation data, but according to traders, there is little hope of a sustained comeback.
In a Twitter discussion on Jan. 12, data analyst Material Scientist warned that significant downside may still return to Bitcoin price action.
“Now we wait”
Despite showing stength since bouncing at $39,600, BTC/USD has yet to convince most analysts that its overall downtrend has ended.
After U.S. inflation data came in at 7% year-on-year for December, those voices of doubt continued, even as spot prices briefly passed $44,000.
For Material Scientist, the problem lies on order books. Bids have disappeared below spot, and if resistance subsequently strengthens immediately overhead, the outlook does not bode well for bulls.
In late November, after Bitcoin reached current all-time highs of $69,000, that exact phenomenon played out — and the result was a rapid crash to below $50,000.
“Remainder of bids was just pulled. Either they’re done accumulating and use liquidity to chase now, or we see the same thing as in late November (pulled bids + stacked asks a few days later),” he summarized.
“Now we wait.”
Should that not be the case, then a “relief bounce” could persist, but regardless, it is now time to “pay more attention” to the market setup, Material Scientist added.
Open interest spooks analysts
Others followed suit in calling for caution over near-term price trajectory.
Related: Bitcoin returns to $42K as bets start favoring ‘short squeeze’ higher for BTC
For analyst William Clemente, the lack of a liquidation cascade, such as that from December, was cause for concern.
Ok ok ok, I need a liquidation cascade. Every day I check open interest and it’s rising. Every day I check OI, high OI. I can’t take this anymore man. It is what it is but I need a liquidation cascade. Can market makers do something??
— Will Clemente (@WClementeIII) January 12, 2022
With a cascade having the potential to go either way, the question was thus how far Bitcoin can climb — or fall — before a decisive move occurs.
“How much more does Bitcoin need to go up before people who were waiting for $30,000 start to FOMO in to the market en masse and trigger a short squeeze?” Mike Alfred, CEO of data resource Digital Assets Data, added.
Source: Cointelegraph.com
