Bitcoin price analysis for January 25-31: price may chop around for the next few days
Bitcoin’s rally from the lows last week shows bulls are accumulating on dips but the bears are unlikely to give up easily
Data from CryptoQuant showed large Bitcoin outflows from F2Pool, the largest mining pool at the moment. The miner seems to have dumped a part of this inventory, as daily outflows reached 10,000 Bitcoin for three consecutive days starting January 17. Although it is not certain whether the entire quantity has been offloaded into the open market, it does show the intent to book profits on the existing stockpile.
Analysts at QCP Capital studied Bitcoin’s price action by dividing it into two 12-hour batches for each of the US and Asia markets. Since March, US hours saw consistent buying while the Asian hours witnessed selling. About two weeks back, this trend of the past few months changed, signalling a possible “institutional exhaustion” among the US buyers.
MicroStrategy attempted to boost sentiment by buying Bitcoin when it dipped to $31,808. However, the purchase of 314 Bitcoin may not be enough to arrest the decline, especially if the large miners plan to sell.
Let’s do the Bitcoin price trend analysis of the weekly chart to spot the critical levels on the downside where buyers may step in.
Bitcoin price technical analysis: weekly chart
Bitcoin corrected 9.82 per cent to end the week at $32,387, the second weekly closing in the red. The price rebounded off $28,800, just below the 38.2 per cent Fibonacci retracement level at $29,739.89.
The shallow correction shows the bulls are not dumping their positions in a hurry as they expect the uptrend to resume. If buyers can push the price above the all-time high at $42,036.45, the uptrend could resume. Above this level, the BTC/USD pair may rally to $50,000.
On the contrary, if the price turns down from the overhead resistance, the pair may consolidate between $28,800 and $42,036.45 for a few weeks. A tight consolidation near the overhead resistance indicates strength and increases the likelihood of a breakout.
The relative strength index (RSI) is still in the overbought zone but has pulled back from its deeply overbought levels above 94. This suggests the froth in the markets has been removed and the pair could be ready to resume its uptrend.
This bullish view will invalidate if the pair turns down from the current levels or the overhead resistance and plummets below $28,800. Such a move will suggest traders are selling on rallies and that could pull the price down to the 61.8 per cent Fibonacci retracement level at $22,153.52.
The Bitcoin price weekly analysis shows the bulls are accumulating on dips. Let’s perform the BTC price analysis of the daily chart to spot any bullish setups.
What is your sentiment on BTC/USD?
Bitcoin price technical analysis: daily chart
Bitcoin plunged below the 20-day EMA on January 21 and dipped to the 50-day SMA where buyers emerged. The bulls are currently attempting to push the price above the 20-day EMA. If they succeed, the pair may rise to the downtrend line.
The 20-day EMA has flattened out and the RSI is just above the midpoint, indicating a balance between supply and demand.
The bears may aggressively defend the downtrend line and if the price turns down from this resistance, the sellers will again try to sink the pair below the 50-day SMA. If they manage to do that, the pair could start a deeper correction.
On the other hand, if the bulls can push the price above the downtrend line, the momentum may pick up and the pair could retest the all-time high.
How to trade Bitcoin this week
The suggestion to avoid buying near the 20-day EMA in the previous analysis kept traders away from a possible losing trade as Bitcoin slipped to the 50-day SMA. A buying opportunity may open up if the bulls can push and sustain the price above the downtrend line. The stop-loss for this trade could be kept just below the 50-day SMA.
Contrary to this assumption, if the price breaks below the 50-day SMA, long positions may be avoided as the pair could enter a deep correction.
Trade Bitcoin to US Dollar - BTC/USD chart
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FURTHER READING: Bitcoin explained simply: everything you need to know
FURTHER READING: Bitcoin vs Bitcoin Cash vs Bitcoin SV: the ultimate guide