Bitcoin may have confirmed that it has entered a bear market following a recent rejection of the $49,000 zone. 

Bitcoin Enters Bearish Cycle

Bitcoin has kicked off the week in bearish mode after taking a 10% nosedive since the market opened. The leading cryptocurrency shed nearly 5,000 points, dropping from a high of $47,250 to a low of $42,490. 

Although a daily close below $44,000 would confirm a full-blown reversal, one analyst with a track record for calling Bitcoin’s price activity believes that further losses are on the horizon. 

The chartist operating under the alias dave the wave predicted in January that Bitcoin would hit a high of $70,000 (it topped at around $64,000 in April and had shed over half of its value by mid-July). Now, dave the wave maintains that BTC has entered a new corrective phase. 

The trader shared a detailed blog post arguing that BTC’s price action evolves in the form of cycles that break out into a “random set of mini manias and subsequent corrections, ones that increasingly lessen in volatility, and in turn lead to price discovery.”

Following the asset’s recent rejection from the $49,000 resistance zone, the technical analyst predicted that BTC could plunge towards the 200-week moving average, which sits at $16,000, in the coming months.

Network Activity Drops

As MicroStrategy and El Salvador have added to the buying pressure behind Bitcoin with recent purchases, the downside potential may be capped. Still, the network activity suggests that interest from retail investors could be waning. 

The number of new daily addresses joining the BTC network has made a series of lower highs over the last two weeks. Roughly 436,000 new Bitcoin addresses were created at the peak on Sep. 16, compared to the 463,000 new addresses created on Sep. 2.

The network’s ongoing contraction can be considered a pessimistic signal as it shows a decrease in user adoption over time. Network growth is often regarded as one of the most accurate price predictors. While exponential network growth tends to pave the way for bullish price action, a prolonged period of network shrinking can indicate that prices are about to tumble. 

Until the number of new daily addresses created on the BTC network picks up, the outlook is likely to remain bearish. 

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Investors appear to be re-entering the market as long Bitcoin positions increase while whales add tokens to their holdings. Although the recent spike in buying pressure looks encouraging, BTC still has one crucial obstacle to overcome. 

Bitcoin Buy Orders Are Getting Filled

Whales have turned their attention back to Bitcoin.

The flash crash of Sep. 7 has sent market participants into fear. Now, some of the most renowned technical analysts in the crypto industry maintain that Bitcoin’s rejection from $53,000 could lead to a catastrophic outlook. 

For instance, the analyst operating under the alias dave the wave believes that the flagship cryptocurrency would drop toward $30,000. They stated that the recent downward pressure could accelerate into a more significant downtrend as the moving average convergence divergence or MACD had a bearish cross on BTC’s monthly chart. 

It’s the monthly MACD, still high [and just crossed bearishly], that adds weight to further consolidation in price. pic.twitter.com/wzScqbMRWM

— dave the wave🌊 (@davthewave) September 13, 2021

Despite the bearish worst-case scenario, several fundamental factors suggest that some investors have taken advantage of the price drop to buy Bitcoin at a discount. 

The number of long Bitcoin positions in Hong Kong-based cryptocurrency exchange Bitfinex has made a higher high for the first time since Jul. 22. More than 3,200 long positions have been created over the last week alone, suggesting that some traders have bought the dip. 

Similarly, behavior analytics platform Santiment shows that whales are accumulating. 

Addresses holding 10,000 to 100,000 BTC have purchased over 60,000 BTC worth roughly $2.82 billion within the same period. This significant number of tokens were also removed from known cryptocurrency exchange wallets, reducing the selling pressure behind Bitcoin.

While buy orders are piling up, IntoTheBlock’s In/Out of the Money Around Price (IOMAP) model shows a major supply barrier ahead of Bitcoin. Roughly two million addresses have previously purchased nearly 900,000 BTC between $46,900 and $49,650. 

Only a daily candlestick close above this resistance wall would signal the resumption of the uptrend. 

On the other hand, Bitcoin must hold above the $44,000 to $46,800 support zone to avoid further losses. Slicing through this significant interest area may encourage investors to sell their BTC to prevent seeing their investments go “Out of the Money.” In this eventuality, a downswing to $38,000 could play out. 

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