Bitcoin (BTC-USD) Has Experienced a Very Substantial Sell-off in the Last Couple of Days

Bitcoin (BTC-USD) has experienced a very substantial sell-off in the last couple of days and is down over 20% in the last month.

Bitcoin (BTC-USD) has experienced a very substantial sell-off in the last couple of days and is down over 20% in the last month.

Panic has hit the crypto world, and a lot of people are already talking about a bear market.

However, we can actually look behind the scenes here to try and better understand why Bitcoin is selling off.

Furthermore, we can use technical analysis to determine the key levels of support that we might test in the next few days.

Ultimately, the fundamentals for Bitcoin have not changed. Data suggests we will see trillions flow into crypto over the next decade.

Bitcoin sell-off explained

The German government has been quietly selling off the Bitcoin it seized over the last few weeks. According to on-chain data, the German government sold around $175 million in Bitcoin on July 4th. And this is just the tip of the iceberg, since the European country still holds a neat stash of around 40,000 Bitcoin.

Following the initial price crash, the founder of Tron (TRON-USD), Justin Sun, offered to buy up all of Germany’s Bitcoin off-chain in order to prevent further price crashes.

We’ve also seen some German MPs voice their disagreement with the country’s actions. Joana Costa said the Bitcoin sales were a hasty move, and that the government should consider holding on to the cryptocurrency in order to diversify the nation’s Treasury reserves.

On top of the sales from the German government, which are a verifiable fact, there’s also some speculation that investors could be selling their Bitcoin received from the recent Mt.Gox settlement, or that perhaps short-sellers are pre-empting this move.

Mt.Gox was one of the first large centralized crypto exchanges, and following its bankruptcy, legal procedures have taken place in order to re-pay their users to the extent possible. The trustee for the Mt.Gox bankruptcy estate said that they had begun paying out settlements in Bitcoin this Friday.

That’s about $9 billion worth of Bitcoin that could be entering as possible selling pressure.

Fundamentally, there’s been a temporary and sudden spike in selling pressure, without a commensurate increase in demand.

It’s certainly worth noting that this sell-off really began taking place on July 4th, a day when regular markets are closed in the US, and one would expect the crypto market to also be less liquid than usual.

Bitcoin technical outlook

Looking at the technicals, however, we are well within the range of a correction I would expect in Bitcoin.

Bitcoin weekly chart (Trendspider)

Looking at the weekly chart, I’d say we are still forming an impulse from the lows back in 2023.

Bitcoin topped around $70,000 in a wave 3 and has now formed a corrective ABC structure in a wave 4. As I write this, we are finding support around the 38.2% retracement, and we are also holding above the 50 week MA.

The RSI is approaching 50 and the last time this happened on the weekly was just ahead of the wave 5 rally.

BTC daily chart (Trendspider)

Zooming in, we can see that we have completed an ABC in wave 4, with the plates moving down a pretty clean five-wave structure.

It’s definitely quite encouraging to see that while the price has fallen, the RSI has held quite well, giving us a bullish divergence.

We did break below the 200 EMA on the daily chart, but we also saw this happen earlier in this bullish cycle.

$54,000 could be the bottom, but below that our next main area of support is just around $50,000 where we have the 50% retracement.

Below that, we may have to worry about the more immediate future of Bitcoin, though I would still argue it would be an attractive long-term buy.

Bitcoin fundamentals remain supportive

The fundamental landscape for Bitcoin is still very much supportive of higher prices, with three great sources of demand coming in over the next few years to push this higher:

Institutions

Nations

Young(er) Investors

The adoption by institutions, including funds and companies, is already well underway. Institutional AUM is over $60 trillion, and we are already seeing a change in the tide. Microstrategy (MSTR) is heavily accumulating Bitcoin, and so are other companies like Tesla (TSLA). US companies hold around $6.9 trillion in cash reserves that could potentially make their way into Bitcoin and even other cryptocurrencies.

Furthermore, we may see a shift in nations too. Yes, this may still be far away, but the recent sales by Germany have brought this fact to the forefront. There are politicians within the system making the case for Bitcoin.

Even Donald Trump, who could potentially