Bitcoin Trades Below $28,000: Should Investors Worry?

At the moment, most of the bullish sentiment that emerged after Bitcoin crossed $30,000 earlier this month seems to have dissipated, and bearish speculation is back on the table. However, whether or not one should be concerned about further crashes depends on certain signals.

Bitcoin predictions are mixed

The falling prices of Bitcoin and Ethereum have caused most major tokens to trade in the red recently. The largest cryptocurrency by market capitalization has plunged 10 percent from its recent peak of nearly $31,000, wiping billions from its total market capitalization.

According to Edward Moya, a senior market analyst at Oanda, the crypto market may have been affected due to Coinbase’s plans to leave the US if the crypto rules remain unclear. If Coinbase leaves the US market, US traders may not feel confident trading on decentralized exchanges, leading to a shrinking crypto market.

He made these comments via an email to CoinDesk. Moya also predicts that Bitcoin will struggle to increase in value amid regulatory tensions in the US, which could drive prices down further.

Nevertheless, expert opinions tend to vary when the future of crypto is involved. Despite the ongoing headwinds, analyst Mike McGlone remains highly optimistic about Bitcoin’s long-term prospects. Fadi Aboualfa, head of research at digital-asset custodian Copper, pointed to Bitcoin’s positive funding rate – where long investors pay a small fee to short traders, indicating overall bullish sentiment. He also said he didn’t see much change in Bitcoin’s landscape from a fundamental perspective.

What does basic data say?

One way to gain more clarity in the debate is by analyzing Bitcoin’s whale activity, which is one of many ways to predict market direction. According to Santiment, addresses holding 10 to 10,000 BTC, which make up two-thirds of Bitcoin’s supply, have not changed the trend too drastically since the second half of last year. Although these addresses have declined since October 2022 and no signs of a rally have emerged, neither have signs of further price declines emerged.

However, social dominance tells a different story. The statistics show the share of discussions in crypto media about a particular coin. A higher number of social dominance is healthy for price development. According to Santiment, Bitcoin’s social dominance was around 20,000 during the March 11 collapse of major crypto-friendly banks. Since then, the number has risen to 30,000. In other words, discussions about Bitcoin have increased since last month, and a long-term bullish signal could emerge if social dominance continues to increase in the coming weeks.

Furthermore, the number of daily active addresses is around 869,000 in April, which is 100,000 higher than in January. Generally, cryptocurrency prices remain poised for sharp price drops as long as their network activity is ticking upwards.

On the other hand, Santiment revealed that Bitcoin’s recent rise to $30,000 was supported by poor trading volumes, which is not a good sign. Although trading volume increased in March, it has fallen over the past month and is now showing a bearish divergence with respect to Bitcoin’s price.

Conclusion

While the above mixed signals are not ideal for a Bitcoin rally, they do not necessarily point to further losses either. However, it should be noted that Bitcoin’s price is affected by a number of external and internal factors. If any market divergence is to occur, we may just see Bitcoin shift down to $26,000, which is the next support area.