Bitcoin price could bounce higher in the short term, says Willy Woo

Key facts:

Willy Woo relates the decline to a perception of risk on the part of investors.
For the analyst, the downturn has little to do with the technical data of the network.

In his latest report on the bitcoin market, analyst Willy Woo affirms that the drop in the price of the cryptocurrency, which occurred this weekend, is not supported by the technical fundamentals of the network, seeing it rather as a sign of reaccumulation of the market.

Woo supports his approach by saying that the recent movements of BTC are more related to an environment that operates in mode Risk-Off, which makes the perception of risk high, making many investors flee.

He adds that this perception of high risk has become a key element to explain the weak performance of bitcoin, making the price of the cryptocurrency have a higher correlation with stock markets.

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As reported by CriptoNoticias, data from Bloomberg confirms this increase, placing the 40-day correlation coefficient between Bitcoin and the Nasdaq 100 and S&P 500 Bitcoin indices at all-time highs.

“Typically in these situations BTC trades in a strong correlation with stocks and with little adherence to the data chain,” Willy Woo explains, linking the downturn to the current macroeconomic environment.

This is an explanation similar to the one presented on Monday by the Spanish economist, Juan Ramón Rallo, who points out to the possible increase in interest rates that the Federal Reserve (FED) of the United States plans to do this 2022, as the cause of the drop in bitcoin.

Rallo argues that investors could be fleeing bitcoin and liquidating their positions, in the expectation of generating higher returns with financial assets and government bonds, among others.

A similar appreciation was made by the Goldman Sachs team, affirming that the possibility that the FED will apply a more aggressive policy than expected to control inflation, would have generated fear among investors.

Downside selling momentum is not massive

Woo clarifies that this downward selling momentum is not backed by a large mass of investors. This, taking into account that most of the whales (owners of 1000 or more BTC) sold mainly during the past months of November and December, being now a phase of reaccumulation.

The analyst also notes that hodlers actual selling has been small compared to other bearish seasons, as these investors continue to hold their currencies. “This is nothing like what we saw in the last mini bear,” says Woo, further reinforcing his build-up thesis.

In his report Willy Woo notes that BTC hodlers have been holding onto their bitcoins. Source: Willy Woo.

He also observes signs of increased demand in the last hours that could precede a price increase in the short term:

We are seeing early signs of demand filtering back into the market, and technical charts point to Jan 24 as a high point in the probability zone for a reversal. If this level holds, we can expect a solid rebound.

Willy Woo, Market Analyst.

The price of bitcoin has experienced a slight rebound in the last hours of this January 24. Source: CoinMarketCap.

In his report, the analyst also compares the current behavior of the market with that observed between mid-2019 and the end of 2020, a period in which BTC moved between USD 10,000 for several months until jumping to almost USD 30,000 at the close of 2020, starting a bullish rally that lasted most of 2021.

At press time bitcoin is trading at $36,566, up slightly 1.4% over the last 24 hours.