Galaxy Digital warns Bitcoin could drop to between $56,000 and $58,000 amid strong selling pressure and lack of market catalysts.
Galaxy Digital's head of research, Alex Thorn, warned that Bitcoin might see a decline to between $56,000 and $58,000 due to ongoing selling pressure and a lack of growth catalysts in the cryptocurrency market.
Bitcoin recently experienced a significant drop of 15% from January 28 to January 31, reaching a low of $75,644. This downturn was largely driven by the liquidation of over $2 billion in long positions in the futures market, marking one of the largest events of its kind.
The price has now fallen below the average purchase price of Bitcoin ETFs in the United States, which is $84,000, and has dipped below the cost basis of coins held in the Strategy balance at $76,037. January marked the fourth consecutive month of losses for Bitcoin, a trend not seen since 2018.
Thorn pointed out a distribution gap between $70,000 and $82,000, indicating a strong possibility that Bitcoin will test the lower end of this range. Key support levels to watch are:
- $58,000 — the 200-week moving average (MA);
- $56,000 — the realized price of Bitcoin, reflecting the average price of all coins in the network.
“Historically, these levels have marked the bottom of market cycles and served as excellent entry points for long-term investors,” Thorn remarked.
Currently, 46% of Bitcoin holders are experiencing losses, with the price down 38% from its all-time high. Historical trends suggest that declines of 40% often extend to 50% or more within three months. Additionally, Bitcoin ETFs have seen outflows totaling $2.8 billion in just two weeks.
Thorn also noted that the narrative of Bitcoin as a hedge against fiat currency devaluation has faltered, with investors gravitating towards traditional assets like gold and silver amid geopolitical instability and economic uncertainty.
Weakening Demand for Bitcoin
Analyst Darkfost highlighted a significant decline in spot market demand, with Bitcoin's trading volume on Binance plummeting from $200 billion in October to $104 billion. Market metrics have dropped to levels not seen since early 2024.
Stablecoin outflows from exchanges have also contributed to market pressure, with their total market capitalization decreasing by about $10 billion. Justin d’Anetan from Arctic Digital linked the current market struggles to macroeconomic uncertainties, particularly regarding the Federal Reserve's policy direction which could bolster the dollar and negatively impact risk assets.
Despite the challenging environment, d’Anetan described the market correction as "bitter but necessary medicine," aimed at reducing excess leverage and curbing speculation. Alphractal founder Joao Wedson believes Bitcoin has not yet reached its bottom, arguing that a true reversal will only occur when short-term holders start realizing losses below long-term investors' realized price.
“The bear market only ends when the short-term holders are in loss, and long-term holders start carrying losses,” Wedson explained.
He cautioned that if Bitcoin drops below the $74,000 support level, it could enter bear market territory. As of now, Bitcoin is trading at $78,696, reflecting a slight increase of 2.5% over the past day. In February, analysts from Bernstein predicted a minimum price of $60,000 for Bitcoin.
