Is Bitcoin set to move lower?

Market overview

The crypto market capitalisation has changed little over the past 24 hours, remaining close to $2.06T. Among the most popular coins with traders, the top gainers are Stellar (+7.3%), Zcash (+4.2%), and Solana (+2.2%). The biggest fallers were Cosmos and Aave (both down 3.9%) and Immutable (-2.9%). 

Bitcoin has been trading predominantly within a narrow range of $59K-$60K for the fifth consecutive day. This is a rather dangerous consolidation for the bulls, as it is taking place below previous local lows, from which the price rebounded in February and June. The leading cryptocurrency underwent a similar consolidation from March to October 2024, stuck in the $55–70K range with brief breakouts. But that was a consolidation in a rising market, whereas this one is in a falling market, given the direction of the 200- and 50-day moving averages and their position relative to the price. If we are indeed seeing a step-by-step decline, the next step could be the $40K mark. 

News background

On-chain data points to the start of a phase of capitulation among holders of the leading cryptocurrency, notes analyst Darkfost. Such periods have always proved profitable for long-term investors who began accumulating the asset then.

At the end of last week, Strategy’s preferred shares (STRC) hit an all-time low of around $71. Ordinary shares (MSTR) slumped by 25% over the week, falling to their lowest level since February 2024.

The share price decline intensified after the Rosen Law Firm announced it would launch a formal investigation into possible breaches of securities laws by Strategy. The lawyers intend to seek evidence of market manipulation and of misleading market participants regarding the true sustainability of Strategy’s assets.

The premium on Bitcoin reserves was a central part of Strategy’s business model. Whilst the shares were trading significantly above the book value of the BTC on the balance sheet, the company was able to issue new shares, purchase Bitcoin and increase its per-share ratio.

Strategy’s board of directors has authorised the company’s management to sell any amount of cryptocurrency from the reserves at any time. Previously, a separate board resolution was required for each sale. The board of directors expects that proceeds from the sale of bitcoins could reach $1.25 billion. 

Summary: The crypto market is stable at $2.06T, but Bitcoin is stuck below key levels. The risk of a decline to $40K is growing against the backdrop of Strategy’s weakness.