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Bitcoin’s Technical Indicators Signal Potential Deeper Pullback to $38K: Analyst

Bitcoin (BTC) has experienced a more than 5% decline to $42,600 since the introduction of spot ETFs in the U.S. last Thursday, indicating what seems to be a classic “sell the fact” price action.

According to an analysis by 10x Research, led by Markus Thielen, Bitcoin’s price patterns and technical indicators suggest the potential for a continued sell-off in the near term. The Relative Strength Index (RSI) divergence is cited as a signal for correction, and 10x Research notes that the pullback could find support near the dynamic level of $38,000. A bearish RSI divergence occurs when prices reach new extremes, but momentum indicators like RSI do not confirm, suggesting possible exhaustion in the upward movement.

Bitcoin hit a two-year high above $49,000 last week, but the 14-day RSI failed to confirm this high, as observed in the chart. The subsequent drop in price has validated the bearish divergence. Additionally, the Moving Average Convergence Divergence (MACD) histogram, used to measure trend strength and changes, has crossed below zero, indicating a bearish shift in momentum.

Markus Thielen suggests that the switch of investors in Grayscale’s ETF, the Grayscale Bitcoin Trust (GBTC), to other low-fee options could weigh on Bitcoin’s price. Grayscale charges a 1.5% management fee, while other asset managers like BlackRock charge only 0.25%. GBTC, previously a closed-end trust, is one of the largest holders of Bitcoin, with a coin stash exceeding $27 billion. GBTC shares began trading in 2013 and became redeemable on January 11th.

Thielen notes, “Grayscale is betting that investors will slowly switch out of their 1.5% annual management fee ETF offering (due to tax consideration) instead of choosing other reputable companies that offer 80% less in fees.” He also highlights negative news around Grayscale’s parent company DCG and Grayscale itself, including charging a 2.0% management fee at one point when the product traded at a 50% discount to its net asset value, potentially overcharging GBTC holders.

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