Buy the Rumor, Sell the News – It Worked Once Again
BTC/USD: The Battle for $40K Is On!
Ever since the rumors about spot Bitcoin Exchange-Traded Funds (ETF) started to spread, the crypto market has been on fire, with rallies happening all over the place. Every hint that the U.S. Securities and Exchange Commission (SEC) would likely approve the Bitcoin ETFs was met with a bump in Bitcoin price. Every Twitter comment was met with massive interest and everyone was eager to offer their 2 cents.
Since January 11, when the Bitcoin ETFs debuted, they added billions in trading volume but most of this volume is transacted in big over-the-counter deals. Bitcoin is now wrestling with the key level at $40,000 after a brief drop that saw it change hands as low as $38,505. The drop was initiated right after the ETF announcement. Prior to that, Bitcoin was trading at $49,048!
And this takes us to the old saying “Buy the rumor, sell the news”, which we’ve talked about many times before. Considering that this drop was expected, maybe it’s not such a bad thing that it happened. There is clear selling pressure in the short term but the ETF approval is healthy for the market in the long run, with massive inflows of capital.
Considering how overbought Bitcoin was (not to mention the multiple bearish divergences), it’s safe to assume that a drop would have come anyway. This is just a case of the technical side agreeing with the fundamentals and producing a pullback that can be beneficial in the long run.
The Online Vibe
Crypto investor Michael van de Poppe advised that the introduction of Bitcoin ETFs may propel BTC much higher than initially anticipated, saying on January 25 that “As a result, #Bitcoin might push higher this cycle than we think”.
Crypto YouTuber Lark Davis shared van de Poppe’s view, saying that if people would look behind the scenes, it would become obvious that the major players are taking advantage of the dip. He continued “major financial institutions, nation-states and companies are taking this chance to accumulate Bitcoin cheaper than before”. But what do you think, are we going downstairs from here? Or to the Moon?
Chart Overview – BTC/USD
The drop from the top at $49,048 to the low at $38,505 was swift and brutal but what goes down must come up… or at least that’s what they say. The recent price action shows that bullish pressure is starting to increase. This is evidenced by the daily candle that touched the mentioned low: it has a long lower wick and a small body. The following candles also show indecision, with their very small bodies and wicks on both the upper and lower sides.
The RSI is approaching oversold, although it has not entered extreme territory yet. It’s possible to see another move down and if that happens, it will offer more clues about the next direction (i.e. it may create divergence or it may send the RSI in oversold).
The most important level right now is $40,000. We may see a rapid break to the upside, which will make the 50 MA the next target; on the other hand, a bounce lower will likely send the pair closer to the next support at $38,000.
