Bitcoin (BTC) has kept retreating in the past week, losing 9% of its value as a result of a shift in both the political and macroeconomic landscape.
This week, a hotter-than-expected inflation print in the United States for October led analysts to anticipate an increasingly hawkish Federal Reserve.
Odds of a 25bps rate hike during the December meeting are now exceeding 90%. However, what’s even worse, a small cohort of analysts envision a 50bps rate hike on the horizon.
Even though the percentage that sees this happening is less than 10%, this indicates that the market’s overall view is that the Fed could take more aggressive actions to curb inflation in the near future.
Bitcoin ETF Inflows and Whale Activity Signal Potential Capitulation Phase
As a result, net outflows to exchange-traded funds (ETFs) linked to Bitcoin have accelerated in the past few days. Thus far in November, investors have taken out $1.9 billion from these vehicles, as bearish sentiment took over the crypto market.
Meanwhile, in the past 5 days alone, total withdrawals amounted to $1.4 billion, following both the Democrats’ victory in the mid-term elections, which is considered a bearish catalyst for cryptos, and this hot inflation report.
Moreover, on November 4, long liquidations hit a 90-day peak at $1.1 billion, indicating an ongoing long squeeze that has pushed Bitcoin below two key supports already — the 200-day exponential moving average (EMA) first and then the $75,000 barrier.
The current scenario is as bearish as it gets for cryptos, especially if we add the fact that Binance, the world’s largest exchange in the sector, suffered a massive hack.
In light of the latest developments, it appears that we may be entering a phase of capitulation after a short-lived bull run, as whales have started dumping BTC.
On-chain data from Santiment confirms that top wallets holding between 1 and 100,000 BTC have already sold 20,000 tokens in November.
This marks a shift from the accumulation behavior we saw in the last few months, and could explain why the token’s key support areas weakened recently.
Whales’ behavior also set the stage for the continuation of this downtrend to much lower levels, potentially eyeing the $71,000 and $65,000 areas as the next stop.
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See all Bitcoin forecastsBTC Could Drop to $65K to Correct Previous Supply-Demand Imbalances
Turning to the daily chart, we have identified two price imbalances, also known as fair value gaps (FVGs), that could soon be either partially or fully filled if the downtrend persists.
These are areas that would typically hold a sizable volume of buy orders. However, they date back to August, back when market conditions were much different.
We are in a completely different scenario now, marked by a radical shift in the U.S. political landscape and a deteriorating macro backdrop.
Hence, we don’t expect that these areas will hold if bearish momentum accelerates, meaning that BTC could soon hit $65,000 to fully correct these imbalances.