Bitcoin is losing momentum, why $40,000 is a key level for future gains

Bitcoin was rejected near the $44,000 price and has been trading sideways since earlier this week. The benchmark crypto might make another attempt to break these resistance levels but will most likely remain range bound until $50,000 and $53,000 are reclaimed.

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At press time, Bitcoin is trading at $42,341, down 3.5% over the past day.

Bitcoin is losing momentum, why $40,000 is a key level for future gains
BTC is moving sideways on the 4-hour chart. Source: BTCUSD trade view

The price of BTC has trended positively after the US Consumer Price Index (CPI), a metric used to measure inflation, pushed down. Before the report was published, the order book for bitcoin was empty and rearranged throughout the week, forming new support levels near $38,000 and $40,000.

Data from Material Indicators shows a key buildup of bid orders below BTC’s current price level, suggesting that bulls will continue to defend the $40,000 price level, at least in the near term. As seen below, there are over $20 million worth of bid orders around these levels.

Bitcoin is losing momentum, why $40,000 is a key level for future gains
BTC price (blue line) with key support (bid orders below price) on low timeframes. Source: Material Indicators

In this sense, the analyst firm Jarvis Labs believes Bitcoin could see a few weeks of relief and less selling pressure. This is supported by bullish divergence in their 30-day returns for Bitcoin, as seen below, whenever this metric returns to 0% higher in this emerging BTC trend.

Bitcoin is losing momentum, why $40,000 is a key level for future gains
Source: Jarvis Labs via Twitter

The upleg was mainly driven by retail investors, according to the company, judging by Bitcoin’s accumulation trends for the past month. Jarvis Labs added:

The 30D-based accumulation trend scores show that retail is confident in bottom accumulation, while whales are more cautious. 7D-based results show the same behavior as opposed to the divergence we saw in December.

Bears cannot shake long-term Bitcoin holders

Two of Jarvis Labs’ metrics remain in the red, particularly those related to the amount of Bitcoin coins in motion and the amount of BTC versus the amount of stablecoins in the market. This suggests that some investors are selling at a loss and others are taking profits as the price touched $44,000.

Additionally, Jarvis Labs was able to determine that long-term holders were not shaken by the bearish price action. Short-term holders have lowered their average or realized price from $53,000 to $50,900, which poses no immediate threat of a recovery push but, the company said, will contribute to future corrections.

As NewsBTC reported, Jarvis Labs has been waiting for some impact on the derivatives sectors to allow BTC to trend higher. That time seems to be here, with negative funding for futures contracts on the Binance, FTX and most crypto platforms exchanges.

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If this metric continues to move into negative territory as prices trend higher, it could signal a more sustained rally. With that in mind, Jarvis Labs added the following on Open Interest (OI), the number of total exchange traded contracts and their impact on the price of BTC:

Open interest/change in market cap has risen to coincide with summer 2021 highs. As the price is now starting to rise, this metric is starting to fall, suggesting that another short squeeze is possible.

Bitcoin is losing momentum, why $40,000 is a key level for future gains

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