Bitcoin Weekly Forecast: BTC crashes as GBTC dumps, but bullish outlook still not under threat

• Bitcoin price is dumping as GBTC shares drop following the opening of redemptions.
• BTC could descend to $40,254, collecting the buy-side liquidity available following the January 3 sell-off.
• A decisive candlestick close above $48,000 would invalidate the bearish thesis.

Bitcoin (BTC) price action since October has been broadly bullish, consolidating within an ascending price channel. The hype around spot BTC exchange-traded funds (ETFs) played a role in nurturing this uptrend, as well as the halving event that remains on the horizon. With the spot BTC ETFs narrative priced in already after the January 10 landmark decision, traders and investors are now navigating the aftermath as the waves of institutional money meet the shores of crypto.

Also Read: Spot BTC ETFs trading volumes approach $5 billion in day one of trading after SEC approvals

Bitcoin holders drenched as GBTC dumps

Bitcoin (BTC) price has dropped 5% during the early hours of the New York session, setting a bad tone for the weekend. It comes after spot BTC ETF approval from the Securities & Exchange Commission (SEC) midweek with markets recording soaring trading volumes. To the naked eye, the soaring volumes are blatantly bullish, but a closer look shows that there is more than what meets the eye.

FXStreet's Lead analyst Akash Girimath curves it out in detail here: Dissecting the $4.6 billion Bitcoin ETF debut: New capital or clever shuffle?

The dump in Bitcoin follows the opening of redemption options following spot BTC ETF approvals. As it happened, Grayscale Bitcoin Trust (GBTC) held over $25 billion worth of Bitcoin, which had been locked up for years because there was no option for selling.

With the recent spot BTC ETF approvals, which inclined toward cash creates, the redemption option opened. This provided leeway for them to exit the trust after years, which means selling the BTC on the open market.

Data from Arkham Intelligence shows that Grayscale sent 4,000 BTC worth $183 million to a Coinbase Prime deposit address, suggesting that investors may be switching their assets to other ETFs or selling normally.

Bitcoin price tests lower boundary of ascending parallel channel

Amid rising selling pressure, Bitcoin price is testing the lower boundary of the ascending parallel channel with the potential for an extended fall as buying momentum continues to decline. With the Relative Strength Index (RSI) nose-diving, the bears are fastening their grip on BTC.

Bitcoin price has also been forming higher highs and higher lows since late December, whilst the RSI formed lower highs and lower lows, culminating in a bearish divergence.

The activation of this chart pattern could send Bitcoin south, potentially going as low as $40,254, where a lot of uncollected liquidity continues to reside. If this level fails to hold as support, the downtrend could extend to $37,800, or in a more dire case, extrapolate the load-shedding exercise to the $30,000 psychological level.

BTC/USDT 1-week chart

Nevertheless, for the prevailing bullish outlook to be invalidated, Bitcoin price must break and close below the $30,000 psychological level. Although it is a possibility, especially as market participants continue trading the news, such an outcome remains rather distant, considering the bulls maintain a strong presence in the BTC market. This is seen in the green histogram bars of the Awesome Oscillator (AO), bolstered by their position in the positive zone.

Also, Bitcoin price enjoys strong support downward, presented by the 50-day Simple Moving Average (SMA) at $42,401, followed by the $40,254 level, and reinforced by the confluence between the horizontal line and the 100-day SMA around $37,800.

The Average Directional Index (ADX) indicator, quantifying trend strength, is bottoming out. This suggests that the prevailing downtrend is losing strength. A pullback could be underway. To dissuade the bears from the ongoing slump, Bitcoin price must recover above the $48,000 psychological level, with a close above this blockade paving the way for the $50,000 target.

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