FX.co ★ BTC drops below $40K. What future may face cryptocurrencies?

The cryptocurrency market like many other markets is in panic. Bitcoin was hit more than other crypto assets. It broke the level of $40K and fell to the key support level of $38.6K. The market cap slid to $1.8 trillion, but then slackened. Nevertheless, most coins touched new lows.

Analyzing the data, we may highlight the key points. At the moment, big investors do not consider BTC a safe-haven asset. It is less resilient to geopolitical factors and monetary policy changes than gold. Notably, the precious metal jumped to its 8-year high at $1,908, whereas BCT dropped below $40K and hit a new local low.

In addition, the correlation between BTC and stock indices became stronger. Thus, the NASDAQ Composite and the SPX are hovering within the sideways channels and showing a downward dynamic. Bitcoin is following the bearish scenario and may continue falling below $38.7K. Bulls are becoming less active, thus lowering the number of unique addresses in the cryptocurrency network. Such factors point to a change in the BTC investment strategies.

Experts at Glassnode emphasize a decline in the BTC reserves in the crypto exchanges. This proves the accumulation process as it was in the summer of 2021. It is obvious that bitcoin will continue its correction. Glassnode also reported that the number of coins, held by mining pools, began falling amid lower yield from BTC mining. However, crypto exchanges are recording an outflow of coins. This reflects an active accumulation period. That is why the market volatility may surge, thus boosting market makers' activity.

Now let us look at the possible scenarios for BTC. The bullish scenario is hardly possible. If the price consolidates above $44.5K, the bearish sentiment will fade away, thus allowing buyers to take control over the market.

Later on Monday, the BTC price stopped near the levels of $39.8K-$40,6K. Thus, according to the second scenario, it is quite possible that buyers will be able to return the price above $40K. However, BCT will hardly break the range of $41K-$42.5K since the number of short orders is very high in this area. If the asset continues losing value, the price may drop below $39K. Taking into account the geopolitical situation and the upcoming Fed's meeting, traders will hardly invest their funds in cryptocurrencies. That is why the price may slide to the low of the current uptrend at $36.1K.

According to the third scenario, the price may tumble to $32K, thus retesting the local low. Although the variant is hardly possible, it still may take place amid the current tensions. Bitcoin may break the level of $36.1K, where the local uptrend began. In this case, it may decrease to $35K-$32K.