Bitcoin (BTC) price has not yet recaptured the $40,000 level, and traders who were expecting a rapid resumption of the uptrend may have been caught off guard by the recent pullback. This could have led to the liquidation of nearly $500 million worth of cryptocurrency futures positions in the last 24 hours.
Overly leveraged positions provide the necessary ammo during an uptrend, but they become a liability when the trend reaches a tipping point.
When the markets fall, long positions with leverage quickly turn into losses, which leads to calls for collateral from brokers. When the margin requirements are not met, brokers leave the positions at the market price, leading to a sharp decline.
Therefore, data showing a decline in leveraged Bitcoin positions over the past few days is a positive sign as it reduces the risk of gradual liquidity.
Daily crypto market data outlook. Source: Coin360
While a sharp decline is usually avoided when the markets are not lifted excessively, continuous buying is necessary to maintain higher levels. If this does not happen, the price will continue to recover gradually.
Grayscale Investments has been one of the biggest buyers over the past few months, but now a new competitor, Osprey Funds, began pricing in the over-the-counter market on Jan. 15 with the stock code OBTC. The firm offers a competitive management fee structure compared to Grayscale.
This is a positive sign for the crypto markets because if both firms attract institutional investors, the buying could continue and Bitcoin could reverse course to pursue new highs.
While Bitcoin is stuck in a range, certain altcoins are hard at work. Let’s take a look at the charts of the top 5 cryptocurrencies that may be favored by bulls in the next few days. BTC / USD
Bitcoin is currently consolidating in an uptrend. The price action of the last few days has formed a symmetrical triangle, often acting as a continuation pattern. The long tail on today’s candlestick suggests that the bulls are buying the declines to the 20-day exponential moving average ($34,241).
BTC/USDT daily chart. Source: TradingView
Upward skewering moving averages and the relative strength index (RSI) in the positive zone indicate that the bulls are in control. If buyers can push the price above the triangle, the next leg of the uptrend can begin.
The first stop may be the current all-time high of $41,959.63, but if the bulls can push the price above it, the BTC/USD pair could rally towards its pattern target at $50,000.
Contrary to this assumption, if the recovery fails to find buyers at higher levels, bears may try to push the price below the triangle. If successful, the pair could drop to $29,688.10 to the 38.2% Fibonacci pullback level.
This level may attract buyers, but if the bulls fail to push the price above the 20-day EMA, the correction could deepen to the 50-day simple moving average ($26,581).
BTC/USDT 4-hour chart. Source: TradingView
The 4-hour chart shows that the bulls bought the fall to the support line of the symmetrical triangle, but they may face resistance on the downward skewering moving averages.
If the price falls from the moving averages, the bears will try to push the price below the triangle. If they succeed, a deeper correction is likely to be made.
On the contrary, if the bulls can push the price above the moving averages, it can rise to the resistance line of the double symmetrical triangle. A break of this resistance can start an uptrend.
However, if the price breaks down from the resistance line of the triangle, the pair could trade inside the triangle for a few more days. LINK / USD
Chainlink (LINK) climbed above the $20.1111 resistance on Jan. 15, followed by another rally on Jan. 16, reaching an all-time high of $22.96. But the long wick on the Jan. 16 candlestick signals higher levels of profit booking.
LINK/USDT daily chart. Source: TradingView
The price bounced back from the breakout level of $20.1111 today, which indicates that the bulls are turning this level to support it. If the bulls can now push the price above $23, the LINK/USD pair could rally to $27 and then to $30.
The rising 20-day EMA ($16.25) and the RSI near the overbought zone suggest the bulls are in control.
Contrary to this assumption, if the price falls and breaks below $20.1111, the next stop will likely be $17.7777. This is an important support because a break below it will indicate a possible change in the trend.
LINK/USDT 4-hour chart. Source: TradingView
The 4-hour chart suggests that the break above $20.1111 pushed the RSI deep into the overbought zone, which may have pulled profit reservations from short-term traders.
However, the positive sign is that the bulls are aggressively buying the decline to the 20-EMA. If the bulls can hold the price above $21.5709, the pair could retest $22.96. A break above this resistance could sustain the uptrend. The upward skewering moving averages and the RSI in the positive zone suggest that the bulls have the upper hand.
This bullish outlook will become invalid if the bears sink and keep the price below the 20-EMA. Such a move could pull the price to $17.7777, which indicates that momentum is weakening. UNI / USD
Uniswap (UNI) is currently in an uptrend but is facing a sell-off above the $9 mark as seen from the long wick on January 16 and today’s candlestick. If the bulls don’t give up too much ground, it will show that traders didn’t rush to the exit after the recent rally and bought in the downturn.
UNI/USDT daily chart. Source: TradingView
The ascending 20-day EMA ($6.15) and the RSI in the overbought zone suggest that the bulls have the upper hand. If the UNI/USD pair remains above the 38.2% Fibonacci pullback level at $7.4725, the bulls will try to continue the uptrend.
If they can push the price above $9.3776, the rally can go up to $12.4597 and then to $15.
Contrary to this assumption, if the bears push the price below $7.4725, the pair could fall to the 20-day EMA. Usually a deep correction indicates that the momentum is weakening, which could result in several days of range-dependent action.
UNI/USDT 4-hour chart. Source: TradingView
The 4-hour chart shows that the pair is currently consolidating after the recent spike. The bulls are buying the decline to the $8 support and the bears are selling above $9.
If the bulls can push the price above the general resistance of $9 to $9.3776, the uptrend could continue.
On the other hand, if the bears push the price below the 20-EMA, the decline could extend to the 50-SMA. Such a move could keep the pair tied to the range for several days. XTZ / USD
Tezos (XTZ) has been in the range of $2.85 to $1.85 over the past few weeks. The bulls are currently trying to push the price above the range and start a new uptrend.
XTZ/USDT daily chart. Source: TradingView
However, the long wick on the January 16 candlestick suggests that the bulls are struggling to hold the price above the range. Today, the long wick and tail on the candlestick indicate instability between bulls and bears.
If the bulls can hold the price above $2.85, the probability of starting a new uptrend increases. The rising 20-day EMA ($2.48) and the RSI above 66 indicate that the path to least resistance is to the upside.
On the upside, the first target target is $3.90 followed by $4.4936. This bullish outlook will become invalid if the XTZ/USD pair breaks below the 20-day EMA and breaks.
XTZ/USDT 4-hour chart. Source: TradingView
The 4-hour chart shows that the bulls pushed the price above $2.85, but were unable to build on strength, which led to a correction. However, the bulls have aggressively bought the decline to the 20-EMA and are now trying to push the price above $3.1838. If they succeed, the uptrend can continue.