Analysts Are Gloomy About Bitcoin's Short-Term Price Outlook Right Now

Some are now forecasting an extension of Monday's 20% price drop as more bitcoin moves onto exchanges and institutional demand cools.

AccessTimeIconJan 13, 2021 at 12:13 p.m. UTC
Updated Sep 14, 2021 at 10:55 a.m. UTC
10 Years of Decentralizing the Future
May 29-31, 2024 - Austin, TexasThe biggest and most established global hub for everything crypto, blockchain and Web3.Register Now

The near-term outlook for bitcoin has dimmed, analysts say, with some now seeing a possible extension of Monday's major price drop.

"There could be another dump as outflows from the cryptocurrency exchange Coinbase Pro have dried alongside an increased transfer of coins onto exchanges," David Lifchitz, chief investment officer for Paris-based quantitative trading firm ExoAlpha, told CoinDesk.

Bitcoin fell by over 20% on Monday to $30,305 amid heavy selling in the spot market.

Bitcoin Coinbase outflows
Bitcoin Coinbase outflows

Outflows from Coinbase Pro, which are considered synonymous with institutional purchases, have receded sharply from the three-year high of 55,000 BTC observed on Jan. 2.

The Grayscale Bitcoin Trust (GBTC), the biggest publicly traded crypto investment trust, hasn't seen inflows since Christmas because it was temporarily closed, as noted by analyst Joseph Young. Grayscale is owned by Digital Currency Group, the parent company of CoinDesk.

That means demand-side pressures, which played a pivotal role in pushing bitcoin from $10,000 to $41,000 over the past three months, had weakened. The trust reopened Tuesday.

Meanwhile, exchange deposits have picked up the pace, a sign that some investors may be looking to liquidate holdings and take profits.

Daily change in bitcoins held on exchanges
Daily change in bitcoins held on exchanges

The number of coins held on exchanges increased by over 57,000 BTC on Tuesday, the biggest-single day change since the markets crash on March 12, 2020, according to data from blockchain analytics firm Chainalysis.

Exchanges have registered an average inflow of 103,000 BTC per day in the past seven days – higher than the 180-day average of 83,700 BTC.

"At a minimum, increased inflows suggest that the type of buyers who self-custody, typically the larger investors, are not buying as much at the moment," Chainalysis economist Philip Gradwell told CoinDesk. "These coins could be held on exchanges to flip if prices rise rather than to sell immediately, but that will put a lid on gains, if any, or even cause a fresh downturn."

Technical charts are also calling for an extension of Monday's drop.

"With bitcoin trading below the Ichimoku cloud, I still see pressure on the downside in the short term," said Patrick Heusser, head of trading at Swiss firm Crypto Finance AG.

The Ichimoku cloud, a technical tool created by Japanese journalist Goichi Hosoda in the late 1960s, includes multiple lines that help identify support and resistance levels and other essential information such as trend direction and momentum, as shown below.

Bitcoin Ichimoku cloud
Bitcoin Ichimoku cloud

When an asset trades below the cloud (red line), the trend is said to be bearish, as is the case with bitcoin at press time.

Heusser said that "$29,000 is the make-or-break level. Things could get ugly if that support is breached," and $36,000 is the level to beat for the bulls.

Chris Thomas, head of digital assets at Swissquote Bank, foresees consolidation in the $33,000–$36,000 range for the rest of the week.

The consolidation could end with a bullish move if institutional demand returns. "We could have a fair amount of fresh buying activity coming over the next few weeks," Thomas said, highlighting the reopening of Grayscale Investments' cryptocurrency products to new investors.

While the cryptocurrency may suffer deeper declines in the short term, the broader bias remains bullish.

"Recent institutional investors have long horizons and will absorb near-term price shocks," while retail investors would buy at discounted price levels for fear of missing out, Jehan Chu, managing partner at Hong Kong-based Kenetic Capital, said. "Expect temporary volatility and then a jump back to the $40,000 level, followed by $50,000 as the bitcoin percentage land grab continues."

Bitcoin is trading near $34,210 at press time, representing a 4% drop on a 24-hour basis.

Disclosure

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.


Learn more about Consensus 2024, CoinDesk's longest-running and most influential event that brings together all sides of crypto, blockchain and Web3. Head to consensus.coindesk.com to register and buy your pass now.


Read more about