Bitcoin Faces Critical Test as $46K Support Level is Questioned: ARK

ARK Invest expresses caution regarding a “make or break moment” for Bitcoin’s price as it confronts vital support levels impacted by various risk factors.

In its latest monthly analysis, the US investment management firm ARK Invest examined Bitcoin’s “most critical price supports” at $52,000 and $46,000.

The report highlights that Bitcoin’s price fluctuations no longer adhere to traditional bull market support levels, such as the 200-day moving average and the cost basis for short-term holders, which are identified as $63,693 and $63,245, respectively.

BTC/USD mean reversion chart. Source: ARK Invest.

Mean reversion levels indicate that the on-chain reversion level around $46,000 may represent a final opportunity, with ARK categorizing its overall perspective as “bearish.”

“At present, Bitcoin’s most significant price supports are at $52,000 and $46,000, the latter validated by its on-chain mean, the red line on the chart,” the accompanying commentary states.

Introducing the Bears: Staking Risk Factors Endanger Key Support

A recent report from Glassnode identified a potential “source of risk” as short-term Bitcoin holders face unrealized losses, raising concerns about possible sell-off pressure.

Likewise, ARK Invest pointed out that institutional investors are also experiencing unrealized losses. Holders of US spot Bitcoin exchange-traded funds (ETFs) may risk being in the red eight months post-launch.

US spot Bitcoin ETF data. Source: ARK Invest.

The report indicated that by the end of August, the estimated cost basis for US spot ETF participants exceeded Bitcoin’s price, raising concerns that “the average ETF investor may be at a loss.”

Additionally, the report highlighted “broad macroeconomic weakness” as a risk factor, referencing declines in the dollar, employment, and inflation.

This concern has become increasingly significant among analysts who interpret these developing macroeconomic issues as signs of a potential recession. The culmination of these factors is the upcoming US Federal Reserve interest rate decision on September 18th.

While a 25 basis point cut is viewed as the more favorable outcome, potentially leading to “long-term price appreciation for Bitcoin as liquidity increases and recession fears diminish,” the report warned that a more aggressive cut could produce the opposite effect.

A 25 basis point cut is regarded as the more favorable scenario, possibly resulting in long-term price appreciation for Bitcoin as concerns about a slowing US economy and recession prospects ease.

Conversely, a more aggressive rate cut could negatively impact, amplifying recession fears and potentially causing a significant Bitcoin retracement, with some predicting a 20% decline.

Currently, traders assign a 27% likelihood to a 50 basis point cut, according to CME’s FedWatch tool. However, 10x Research cautions that this contrasts with their interpretation of the “prevailing consensus,” which leans towards aggressive cuts.

Guiding Light: ARK Remains Optimistic About Bitcoin

Despite these bearish signals, ARK Invest holds a positive outlook for Bitcoin, referencing historical data that supports the ongoing bull market. The Bitcoin MVRV Z-score, which compares market capitalization to its cost basis, remains in “bull market territory.”

Bitcoin MVRV Z-score. Source: ARK Invest

At the end of August, the MVRV Z-score stood at 1.6, while the mean score was 1.42. The mean value of the MVRV Z-score serves as a dividing line: scores above the mean suggest a bull market, while scores below indicate a potential bear market.

While it remains entirely plausible that we may approach these supports, it could represent an accumulation opportunity rather than a precursor to a bear market.

This sentiment is echoed by a previous 10x Research report, which identified the optimal entry point for a bull market in the low $40,000 range.

Moreover, other analysts support this perspective, citing historical and technical patterns as reasons that the final quarter of this year could serve as a potential breakout period, with a six-figure Bitcoin “still in play” as we progress toward 2025.

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