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On Sunday, Bitcoin managed to recover from its six-day losing streak and bounced back above $42,000. BTC avoided dropping below the key psychological level of $40,000 that analysts warned might trigger a further selloff.
Bitcoin soared as high as $42,205 on Sunday and ended last week’s price drop that sent the world’s number one crypto by market cap towards $40,000 from above $48,000, based on Coindesk data. While Bitcoin dropped slightly during Monday’s trading, BTC managed to maintain its price above $40,000 and traded at $40,963.50 at the time of writing.
Analysts warned that a drop below $40,000 might trigger a further selloff. The crypto has not fallen below $40,000 since September 2021 and is currently trading around 40 percent lower than its November 2021 all-time high near $69,000.00
“If the market has based at these levels, we might get that short squeeze we’ve been waiting so patiently for,” QCP Capital, a Singapore-based crypto trading firm, wrote on its Telegram channel on Sunday.
Bitcoin’s price tends to fall in January based on historical data. In fact, the crypto’s average monthly YTD return for the month of January for the past nine years is -3.3 percent. However, the crypto’s price drop this month is markedly higher as BTC is already down 11.4 percent since the year started.
However, it’s not only BTC that fell last week as most cryptos suffered the same fate after the release of the Federal Reserve minutes from its December meeting. The Fed hinted that it would tighten monetary policy faster than previous expectations.
“The minutes confirmed a strong hawkish bias with markets now pricing in a 90% chance of a Fed [rate] hike in March,” QCP Capital wrote. “In the bigger picture, it seems likely that the all-time highs in BTC and ETH will remain capped for most of 2022 as a result of central bank tightening.”
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