Bitcoin (BTC) price analysis 31 Jan: Is downtrend over?

Bitcoin could consolidate in the next few days as currency hits 'exhaustion bottom'

Bitcoin’s price slipped below $33,000 on 24 January as investors worried about the US Federal Reserve’s forthcoming tightening cycle.

However, lower levels attracted bottom-fishing by traders, which led to a recovery later in the week. The main question troubling investors is whether the bottom is in or the decline could extend further.

John Roque, analyst at 22V Research, said history showed that bitcoin falls about 78% during bear markets. If that gets repeated, “a 78% decline from the bitcoin high of nearly $69,000 would imply a potential downside figure of about $15,000”, CNBC reported.

On the other hand, CNBC host Jim Cramer, citing veteran technician Tom DeMark’s chart interpretation, said bitcoin could form “exhaustion bottoms this week”, adding “it might be too late to sell and you need to consider buying”.

Analysts also seem divided on the long-term prospects for bitcoin. In its new report, titled ‘Big Ideas 2022’, ARK Invest analysts projected that “bitcoin’s market capitalisation could scale more than 25-fold in the next decade, with each (coin) exceeding $1m in value.”

The recent drop in bitcoin seems to have shaken the belief of strategists at JPMorgan, however, who have cut their long-term theoretical bitcoin price target from $150,000 to $38,000. 

“Our previous projection that the bitcoin to gold volatility ratio will fall to around 2x later this year seems unrealistic. Our fair value for bitcoin based on a volatility ratio of bitcoin to gold of around 4x would be one quarter of $150,000, or $38,000,” Business Insider reported JPMorgan as saying.

Could the crypto relief rally continue and will bitcoin go up? Read our BTC price analysis to find out. 

Bitcoin weekly chart
Bitcoin weekly chart. Credit: Currency.com

Bitcoin price technical analysis: weekly chart

BTC’s price attempted a recovery last week, rising 4.49% to finish at $37,906.70. However, the BTC/USD pair is likely to face strong resistance at the breakdown level of $39,565.25, as the bears will attempt to defend this level.

The 20-week exponential moving average (EMA) continues to slope down and the relative strength index (RSI) is in negative territory, indicating that the path of least resistance is to the downside. 

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If the price turns down from the current level, the pair could retest the recent low at $32,929.95 and then challenge the psychological support zone of $30,000 to $28,639.70.

Contrary to this assumption, if the price rises and breaks above $39,565.25, the pair could rally to the 20-week EMA. This is an important level to watch out for because a break and close above it will be the first indication that the correction may be over.

The bitcoin price analysis shows that bulls are attempting a recovery but they will have to overcome stiff resistance from the bears at $39,595.25 to deter the sellers from pouncing on every rise. 

Bitcoin daily chart
Bitcoin daily chart. Credit: Currency.com

Bitcoin price technical analysis: daily chart

BTC’s price has turned down from the 20-day EMA, indicating that the sentiment remains negative and traders are selling on rallies. The bears will now try to pull the price below $35,525.50. If they manage to do that, the possibility of a break below $32,929.95 increases.

Both moving averages are sloping down and the RSI remains in negative territory, indicating that bears are in command.

Contrary to this assumption, if the price turns up from the current level or the support at $35,525.50, the bulls will again try to drive the pair above the 20-day EMA. If they manage to do that, the pair could rally to the 50-day simple moving average (SMA).

The bulls will have to push and sustain the price above this level to signal that the downtrend could be over.

Bitcoin: buy or sell at current levels?

The bitcoin price analysis shows that bears are selling on rallies and bulls are buying on dips. This could keep the pair range-bound for the next few days. This neutral move will invalidate on a break above $40,000 or below $32,929.95. 

The views and opinions expressed in the article are those of the author and do not constitute trading advice. Trading and investing involve substantial risks and you should do your own research or contact your financial adviser before arriving at a decision. Cryptocurrencies are highly volatile – never invest more than you can afford to lose.

Bitcoin to US Dollar
Daily change
16991.9
Low: 16939.8
High: 17059.3

Further reading

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