Bitcoin Enters Consolidation Phase, Fails To Break Through $38K Price Level

Bitcoin (BTC) entered the consolidation phase as it failed to hit the $38,000 price level following weeks of positive price movements.

Bitcoin attempted to break through the $38,000 threshold, but heavy profit-taking in futures and spot markets served as stumbling blocks for the king of crypto to trade beyond the price level, as per the latest edition of the Bitfinex Alpha report.

"Last week, BTC made a second attempt to break through $38,000, but the momentum was short-lived, as heavy profit-taking was seen in both the futures market — as indicated by negative Cumulative Volume Delta and an 8.7% drop in open interest — and in the spot market, where there was a wall of limit sell orders," Bitfinex analysts said.

The report warned about "signs of waning momentum," which, based on history, is usually associated with market declines and selling pressure from short-term holders taking profit.

"Bitcoin is currently trading around the monthly opening price for November, with signs of waning momentum, with positive funding rates being seen on futures contracts — which is historically associated with market declines — as well as the potential for selling pressure from short-term holders realizing profits," the report explained.

The upcoming Bitcoin halving event, according to analysts, threatens a "significant tightening in Bitcoin supply" in addition to "available supply" and "supply storage" pointing to long-term investors accumulating BTC at a rate that far exceeds the issuance of new Bitcoin.

"As the fourth Bitcoin halving, expected around April 2024, approaches, a significant tightening in Bitcoin's supply is evident. The 'available supply' and 'supply storage' rates indicate that long-term investors are accumulating Bitcoin at a rate far exceeding new Bitcoin issuance. This is contributing to the tightening supply scenario as the halving approaches," the report said.

The Bitcoin ecosystem, however, is currently enjoying "robust health," as seen in the surge in mining fees, which connoted "higher demand for processing transactions on the Bitcoin network, leading to increased revenue for miners. This is an important trend to watch as we head towards the halving in Q2 2024."

Bitcoin, the world's first-ever crypto asset and the largest in terms of market cap, was trading in the green zone at $37,370.82 as of 4:05 a.m. ET on Tuesday with a 24-hour trading volume up by 44.22% at $20.68 billion.

Bitcoin's price action has represented a 0.40% increase in the past 24 hours and a 1.8% gain in the last seven days.

Data from CoinMarketCap revealed that BTC's circulating supply stands at 19.55 million BTC while its value continues to climb up by 0.41% at a $730.55 billion market cap.