The Bitcoin market could soon be trapped in a falling downtrend after registering gains of more than 70 percent YTD. On the daily timeframe, the bulls have struggled to maintain a rising uptrend, whereby a head and shoulder (H&S) formation seems imminent. Notably, the H&S formation in this regard depicts sellers en route outpacing the buyers. As a result, $25k in the short haul appears more actionable than a bull rally continuation.
Bitcoin (BTC) Demand Shrinks
According to a recent on-chain update by Glassnode, the total number of new Bitcoin addresses has significantly shrunk since the onset of May. Interestingly, the figure has dropped below the FTX levels, thus insinuating a possible entrenched price correction ahead. Moreover, fewer Bitcoin wallets reciprocate to lower demand, which is a catalyst for the bears to step into the arena.
Bitcoin network is experiencing a decrease in user adoption, which is leading to a contraction in the network. This can be observed through the creation of lower highs and lower lows in the Bitcoin market.
As a result, this can create a potential for a price correction, as there is less demand to support the current price level.
Price Action
The Bitcoin market experienced more sell pressure in the past few weeks following the rise of new meme coins including Pepe and WOJAK. According to market aggregate data from Coinglass, 88 percent of $30 million liquidated in the Bitcoin market were long traders in the past 24 hours. Essentially, the long traders are easily converted to short traders thus fueling a possible long squeeze.
According to a popular trader with over 39k followers on TradingView, MMBTtrader, Bitcoin price is headed below $26k soon. The analyst noted that Bitcoin short traders are looking at $26k as the daily support and $23.5k as a major Fibonacci support level.
“As we said, a $30K resistance zone is strong enough to dump the price here or to form a range market here. So now we are looking for at least more dump here to support like $26K. Only if the $30K resistance breaks then we can expect a bullish market,” the analyst noted.
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