BTC/USD daily chart. Source: TradingView

Let’s look at why BTC will likely recover in the short term.

Shark and Whale Accumulation

A look at on-chain data reveals that BTC’s ongoing correction may end once the large holders begin stacking up more.

According to market intelligence firm Santiment, the percentage of Bitcoin supply held by sharks and whales is still “mildly down” compared to October, when crypto prices began rallying.

still help trigger another #bullcycle for the #cryptocurrency sector as we saw in October, November, and December. But whale accumulation of these three assets, in particular, would be a key #bullish signal that many traders would welcome as the $BTC halving is now
(Cont) 👇

— Santiment (@santimentfeed) January 20, 2024

Sentiment added,

“But while accumulating these three assets, in particular, would be a key #bullish signal that many traders would welcome as the $BTC halving is now just under 14 weeks away.”

This may not take long to be realized as spot Bitcoin ETFs are accumulating more of this asset. According to the latest data, spot Bitcoin ETFs now collectively hold 95,000 Bitcoin after six full days of trading, with assets under management (AUM) approaching $4 billion.

According to data from senior Bloomberg ETF analyst Eric Balchunas, the capital influx into the recently launched ETFs has surpassed the outflows from the Grayscale Bitcoin Trust (GBTC).

Note: the more we think about it and talk to ppl, prob only a small minority of the GBTC outflows are likely going to the Nine right now as much of it was FTX and traders who arb-ed discount. Also the proportionality of the flows to the size of the firm is almost perfect,…

— Eric Balchunas (@EricBalchunas) January 20, 2024

GBTC’s assets under management have decreased by $2.8 billion in the first six days of trading.

Continued accumulation would signal large investors’ belief that the asset will continue rising, which is a bullish sign.

Decreasing BTC transfer to exchanges

More data from Glassnode, an on-chain market intelligence firm, shows that the amount of Bitcoin sent to exchanges has decreased over the last ten days.

According to the chart below, the total transfer to exchanges has decreased from 134,627 BTC on Jan. 12 to 26,463 on Jan. 21.

BTC Exchange Inflow Volume. Source: Glassnode

A decline in Bitcoin exchange inflow suggests fewer individuals deposit their crypto on exchanges. This trend can be interpreted as a positive sign, indicating increased confidence among investors and traders to hold onto their Bitcoin rather than sell it.

Such behavior contributes to the stability of Bitcoin’s supply and potentially supports long-term investment strategies.

The Crypto Fear and Greed index is back in the “greed” zone after dropping to “neutral” last week.

Increasing bullish market sentiment could be a signal for a marketwide recovery. The “greed” value means market participants hope the market will take a positive turn shortly.

Bitcoin sits on solid support around the $40,000 zone

From a technical point of view, BTC enjoys robust support on the downside. These are areas defined by the SuperTrend’s green line at $40,595, the 1000-day exponential moving average (EMA) at $39,310, and the 200-day EMA at $35388.

Perhaps the $40,000 buyer congestion zone is Bitcoin’s most important support line. Note that several attempts to pull the price below this point in the recent past have been futile. This level also acts as the last line of defense for Bitcoin.

BTC/USD daily chart. Source: TradingView

On the positive side, the SuperTrend indicator is still positive since it flipped below the price and turned from red to green on Oct. 1. The market conditions still favor the upside.

As such, increased demand from the current levels could see the big crypto rise to confront resistance from the 50-day EMA, currently at $42,030. Above that, the following line of resistance would be the $44,000 and $45,000 psychological levels before the crypto rises to the much-awaited $50,000 mark.