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Bitcoin is on the verge of a bearish breakdown, with a slight chance that the $25,000 support level may hold.
On Sept. 11, Bitcoin (BTC) fell out of its parallel range between $25,500 and $26,500, reaching an intraday low of $24,950. A daily close below $24,750 poses the risk of a decline into the sub-$20,000 territory, although there remains a small possibility for a resurgence in bullish momentum.
Pseudonymous trader Horse suggests that Bitcoin at $25,000 offers a short-term buying opportunity, as it is the “optimal area to trap sellers” and “arguably the most favorable location for long contextual” risk-to-reward ratio.
I believe the likelihood of the market breaking this level after the initial major test is low.
It appears to be the optimal area to trap sellers, and arguably the most favorable location for long contextual R:R.
I’ll catch a falling knife. pic.twitter.com/eFNMzBCPJW— HORSE (@TheFlowHorse) September 11, 2023
The price movements in global markets and on-chain indicators reaching historical lows may provide buyers with optimism that a positive trend could emerge.
Is DXY reaching its peak?
Bitcoin typically exhibits a negative correlation with the U.S. dollar and a positive correlation with equities.
On Sept. 11, while the S&P 500 and Nasdaq stock market indexes were experiencing gains, the U.S. Dollar Index (DXY) was declining.
The DXY is approaching its long-term range high around 104.8 points, suggesting the potential for a negative price reversal. A weakening dollar could benefit Bitcoin’s price.
Daily chart of the DXY. Source: TradingView
The Consumer Price Index (CPI) report in the United States on Sept. 13 is expected to provide a significant direction for global markets.
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Bitcoin traders may realize profits at $26,000
As per the latest report from on-chain analytics firm Glassnode, Bitcoin’s price decline over recent weeks has led several metrics to reach historical lows.
The current market environment is marked by low liquidity and trading volumes. While this complicates the ability of bulls to push the BTC price through various resistance levels, long-term holders may begin to accumulate as bullish sentiment wanes.
According to Glassnode:
“Realized Profit and Loss are similarly at levels comparable to the 2020 market, indicating what is arguably a complete and total wash-out of the exuberance from the 2021 bull market.”
Furthermore, Bitcoin’s negative price movement since mid-August has resulted in a “vast majority” of short-term supply falling “into an unrealized loss,” which could serve as a potential short-term reversal point.
Bitcoin’s short-term holder supply in profit. Source: Glassnode
However, Glassnode also pointed out that “volatility, liquidity, trade volumes, and on-chain settlement volumes are at historical lows,” leading the market into a state of “extreme apathy, exhaustion, and arguably boredom.”
Related: GBTC ‘discount’ hits smallest since 2021 despite BTC price at 3-month lows
Consequently, many sellers may emerge in the event of a bullish reversal, particularly near the break-even point for short-term buyers around the $26,000 mark.
In summary, the price movements of the DXY and on-chain data indicate that buyers could return sooner than anticipated, making the current price action a potentially advantageous opportunity to initiate Bitcoin longs.
This article does not constitute investment advice or recommendations. Every investment and trading decision carries risk, and readers should perform their own research before making any decisions.
