Here’s why Bitcoin traders say a drop to $38K is the worst case scenario

The fallout from the Federal Reserve’s recent hawkish comments about raising interest rates as soon as March continued to weigh heavily on the cryptocurrency market on Jan. 6. The Crypto Fear & Greed index has been dialed down to 15 and some traders are lamenting the possible start of an extended bear market. 

Crypto Fear & Greed Index. Source: Alternative

Data from Cointelegraph Markets Pro and TradingView shows that bears attempted to challenge the lows set on Jan.5, bringing BTC price down to $42,439 during early trading on Jan. 6.

BTC/USDT daily chart. Source: TradingView

Let’s take a quick look at where analysts think the price might go in the next few days.

Bitcoin could bottom between $38,000 and $40,000

According to Mike Novogratz, the CEO of Galaxy Digital Holdings and a staunch cryptocurrency advocate, this latest move down “has been on low volume” and highlighted the fact that there is a “tremendous amount of institutional demand on the sidelines.”

As for whether or not Novogratz sees the current market conditions as a good buying opportunity, the experienced trader told CNBC that “he’s waiting a little longer to buy crypto” and suggested that the market will “be volatile over the next few weeks.”

Novogratz said,

“Bitcoin could find a bottom at the $38,000 to $40,000 level.”

BTC attempts to establish a higher low

A closer look at the recent BTC price action was offered by crypto analyst and pseudonymous Twitter user Rekt Capital, who posted the following chart comparing the current market conditions to those that were seen the last time BTC price fell below its 50-day exponential moving average (EMA).

BTC/USD 1-week chart. Source: Twitter

According to Rekt Captial, BTC “has deviated below the blue 50 EMA” and is now in the process of trying to set a new higher low (HL) as represented by the green dashed line.

Rekt Capital said,

“In May 2021, BTC also formed a Higher Low (orange) upon deviating below the 50 EMA. BTC held the HL initially but wicking below it was common also.”

Based on the circled section provided on the above chart, Rekt Capital sees the possibility of BTC…

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