Bitcoin is forming a consolidation structure on both the daily and 4-hour time frames. Based on the number of active users on the network, we see a lack of demand from retail investors. Therefore, any sudden change in market sentiment can result in unexpected volatility.

Technical Analysis

Long term

Bitcoin was rejected by a long-term descending resistance line after failing to sustain its bullish momentum. It also broke below the 50-day SMA with significant bearish momentum.

The cryptocurrency is currently trading above the $35,000 support area. From a technical perspective and uncertain macro conditions, the market is likely to be in a swing/consolidation phase for the medium term. The $34k-$35k zone will be the support of the mentioned range while the $45k-$46k supply zone will be at the top.

BTC/USDT daily chart | Source: TradingView

In the short term

The price broke out of the short-term resistance line (in blue) and moved up into the supply zone of the range. Currently, this line is being retested as support for the lower timeframes. There are two options here:

1. BTC completed the pullback and moved towards the top of the range. To do so, it must first create a short-term uptrend and then consolidate before beginning the rally, as seen in the green pattern.
2. The price broke below both the trend line and the support area and bitcoin started a fresh decline to reach lower prices. A liquidation event of long positions is inevitable in this scenario, accelerating the rate of decline.

BTC/USDT 4 hour chart | Source: TradingView

Onchain analysis

Active bitcoin address (EMA 30).

Supply dynamics are a key focus for on-chain analysts. Over the past year, especially after the $64,000 ATH in March 2021, most long-term holders have had strong faith in HODL and are accumulating even more.

As a result, the price made another ATH ($69,000) in November 2021 but has since fallen more than 50%. Looking at the number of active addresses (30-day EMA) out there, it is clear that there are far fewer active users at $69,000 than at the $64,000 highs.

This bearish divergence indicates a massive lack of demand. Rumors of a Fed rate hike have deterred many retail investors from returning to the market. This indicator will be an important indicator to watch in the future. Additionally, when bitcoin price finds a bottom and starts a new rally, it must be accompanied by an increase in active addresses. If not, it’s probably a cop trap.

Source: CryptoQuant

Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions

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