Bitcoin Price Falls Below $40,000 – Key Levels to Watch for BTC

The price of Bitcoin fell by 5.8% from $41,553 on Jan. 22 to hit a six-week low of $39,372, according to data from CoinMarketCap. This resulted in $282 million worth of long positions being liquidated across the crypto market.

Before the drop, many traders expected BTC to hold above $40,000 as they waited for the volatility that would push the price upward, but that was obviously not the case.

With the substantial liquidations, it's important to analyse where the big crypto could be headed over the next few days.

Bitcoin's price performance comes as the traders reel from the unexpected result of the United States Securities and Exchange Commission's (SEC) approval of spot Bitcoin ETF products. The constant GBTC-linked selling of BTC at Coinbase is being blamed for the market crash.

Grayscale deposited more than $600 million worth of BTC on Coinbase on Jan. 22, bringing the total to over $2 billion. Meanwhile, bankruptcy managers at FTX sold the entirety of its 22 million GBTC shares – the equivalent of nearly $1 billion, adding to BTC's selling pressure.

According to data from futures trading & information platform Coinglass, long-position liquidations for Bitcoin topped $61.99 million on Jan. 22 against $12.4 million short liquidations. Cross-crypto long liquidations amounted to more than $282 million.

Bitcoin liquidations chart. Source: Coinglass

An analyst at ChainAfrik Network spotted BTC trading around $40,000, with data from IntoTheBlock revealing a "mixed picture 77.66% of holders are profitable, yet 19.93% are experiencing losses."

If the selling continues, these investors could decide to take profits adding to the selling pressure. What are the key levels to watch from here?

Bitcoin price analysis

BTC fell from 20-month highs above $49,000 reached on Jan. 12 to set a swing low around $39,290 on Jan. 22.

This downturn saw the price lose a key support level at $41,890, embraced by the 50-day exponential moving average (EMA). At the time of writing BTC was hovering around $39,983, embraced by the 100-day EMA.

Key levels to watch on the downside are the psychological level at $38,000 and the 200-day EMA at $35,418. Below that, the $35,000 support floor could provide the last line of defense for the flagship cryptocurrency. Such a move would bring the total losses to 12.5%.

BTC/USD daily chart

Important levels to watch on the upside are the 23.6% Fibonacci retracement level at $41,590, the 50-day EMA and the $42,000 major resistance level.

Higher than that, Bitcoin may rise toward the 50% retracement level around $44,000 and later to $45,000. Breaking this barrier would signal sustained recovery for Bitcoin with the next logical move being a rise toward the $50,000 psychological level.