The Reason For The Inability of Bitcoin Bulls to Move The $42K BTC Price Range

Bitcoin is currently experiencing a liquidity stalemate, causing a lack of significant catalysts for price volatility, according to recent research. Despite institutional buying, the cryptocurrency has struggled to break the $43,000 barrier for seven consecutive days. 

Source: cryptoslate.com

Data from TradingView highlights the narrow trading range that Bitcoin has maintained since a 15% drop last week following the introduction of the first U.S. spot exchange-traded funds (ETFs). While the downside has not worsened, the lack of bullish momentum has hindered a return to the broader trading range, capped at $48,000. Material Indicators, a trading resource, identified a crucial issue contributing to this situation: an excess of liquidity around the spot price. On January 18, it shared insights with subscribers on X (formerly Twitter), emphasizing the classic notion that Liquidity Dampens Volatility. Material Indicators provided a heatmap of BTC/USDT order book liquidity on exchange, the largest global exchange, revealing substantial bid support in the range of $42,000 to approximately $42,500. This abundance of liquidity is considered a significant obstacle to the resurgence of price volatility.

On the weekly perspective of the exchange order book, there is a noticeable shift with over $10 million in BTC bids now positioned above $42,000. However, resistance levels have been strengthening beyond $43,500, the analysis continued. The heatmap also validated that since Bitcoin dropped below $44,000, substantial seller interest has emerged at both $44,000 and $45,000. Material Indicators asserted that there are currently no evident catalysts capable of inducing significant market fluctuations in the short term. 

In a separate post on X, Philip Swift, the creator of the statistics resource Look Into Bitcoin, highlighted a traditional signal on the Value Days Destroyed (VDD) Multiple metrics. Swift explained that VDD, which gauges spending velocity over time by multiplying the existing Coin Days Destroyed metric by the current BTC price, typically indicates a local top when it surpasses 1.5. The Value Days Destroyed Multiple reached elevated levels for this early stage of the cycle, Swift wrote, accompanied by an image of the indicator. The anticipated impact of institutional access to Bitcoin has yet to manifest in terms of constraining supply and the consequent price surges. 

The possibility of substantial Bitcoin (BTC) sales may not be over yet, as seen in the aftermath of the ETF launch, which triggered widespread liquidations among traders and a lingering cycle of losses for BTC/USD. The full impact of institutional access to Bitcoin on supply and associated price increases has yet to materialize. Notably, the potential for a significant sell-off by major players is still looming, competing with ETF activity, including the rotation out of the Grayscale Bitcoin Trust (GBTC). The Grayscale Bitcoin Trust has sold only 27,000 Bitcoins despite strong demand for ETF inflows. It is worth noting that FTX has not yet liquidated its GBTC position, hinting at the possibility of further selling pressure in the future.

Disclaimer: FameEX makes no representations on the accuracy or suitability of any official statements made by the exchange regarding the data in this area or any related financial advice.