Bitcoin Breaks Key Support and Could Drop to $100K Despite Strong ETF Inflows

Bitcoin (BTC) has gone down by nearly 2% in the past 7 days and although that does not sound too alarming it has broken below a key area of support that may ignite a much deeper correction.

The crypto market has been cooling off since the head of the Federal Reserve, Jerome Powell, confirmed that the U.S. central bank is ready to start cutting rates.

In addition, it appears that capital is rotating to altcoins at this stage of the cycle as BTC’s dominance has been steadily declining and currently sits at 57.7% after hitting a peak at 65% in June this year.

BTC ETFs Take In $440M Despite Downtrend

The Fear and Greed Index shows that market sentiment has been leaning toward fear and caution. This key gauge currently stands at 39, meaning that investors are fearful, possibly as they believe that cryptos could have hit a local top.

Crypto liquidations were relatively calm in the past week compared to the historical spikes. The strongest sweep of long positions took place on August 28 when $461 million worth was flushed out of the market as BTC dropped from $112,000 to $108,000.

Bitcoin Spot ETFs Net Inflows – Source: Farside Investors

Despite this wave of bearish momentum, net inflows toward BTC spot exchange-traded funds (ETFs) were mostly positive last week. Data from Farside Investors indicates that these vehicles received $440 million during this period.

This indicates that market participants are buying the dip and this could be a silent signal that BTC has entered a phase of accumulation ahead of its next leg up. Paired with favorable macro conditions in the form of upcoming rate cuts and a pro-crypto administration in the White House, the long-term outlook for the top crypto is still bullish despite the latest decline.

Bearish Breakout Risks Drop to $100K

The latest downtrend has pushed Bitcoin (BTC) below its trend line support. The selling pressure has been strong enough to break the $110K level, which had acted as resistance in past instances and that should have cushioned this decline but didn’t.

BTC/USD Daily Chart (Bitstamp) – Source: TradingView

The downturn could persist until hitting the 200-day exponential moving average (EMA) first and we may witness a strong bounce after that level is touched as part of a normal mean reversion move.

However, if bearish momentum accelerates, the most likely target in the near term would be the $100,000 area. BTC has already found strong support at this level multiple times in the past and it would be hard to envision a much deeper drop at this point as market conditions remain very favorable for cryptos as a whole.

This means a downside potential of at least 8% from where BTC is now. A drop to this level could be an interesting buying opportunity. These persistent positive net inflows indicate a divergence between the price action and investors’ attitude toward BTC.

We should be witnessing big outflows to categorize this as the beginning of a trend reversal. Since that has not been the case thus far and with so many new corporate treasuries launching, altcoins like Ethereum and BNB Coin reaching new all-time highs, and the Trump family supporting all kinds of crypto-related endeavors, a reversal at this point seems unlikely.