The cryptocurrency market has continued its poor start to the week as Bitcoin has dropped below the $91k level.
The leading cryptocurrency is down 1.6% in the last 24 hours and is now trading at $90,940. The bearish performance comes amid the ongoing geopolitical tension between the United States and Europe.
BTC could retest key support levels in the near term if the selloff continues.
BTC dips to $90k as volatility declines
Bitcoin, the number one cryptocurrency by market cap, has failed to hold its price above $91k and is now trading around $90,900.
This performance comes following the dip on Monday that resulted in $878 million worth of leveraged positions being wiped out from the market.
Analysts point out that Bitcoin’s technical structure remains weak despite its recent rally above $90k.
In an email to Invezz, Dr. Sean Dawson, Head of Research at the on-chain options platform, Derive.xyz, pointed out that Bitcoin’s volatility has declined steadily to around 38%, a two-month low and well below the 54% levels seen in November.
ETH has followed a similar path, with volatility compressing from 78% to 53% over the same period, the analyst added.
“While markets appear calm on the surface, macro risks are building. Rising geopolitical tensions between the US and Europe – particularly around Greenland – raise the risk of a regime shift back into a higher-volatility environment, a dynamic not currently reflected in spot prices,” Dawson said.
Bitcoin has been trading between the $90k-$80k regions in recent months.
However, Dawson pointed out that there is a possibility of Bitcoin retesting the $80k level by the middle of the year.
Data suggests markets are increasingly positioned for weakness in the first half of the year.
For the BTC June 26 expiry, there is a significant concentration of put open interest across the $75K-$85K strikes, implying expectations of a drawdown into the mid-70s to low-80s before the second half of the year.
While Dawson’s prediction could play out over the next few months, Bitcoin’s macro structure has not changed in recent weeks.
The structure remains weak and indecisive, with leveraged traders suffering from this market indecision.
BTC could retest the $89,900 support level
The BTC/USD 4-hour structural chart remains bullish despite losing 4% of its value in the last two days.
While the structure remains bullish, market sentiment has switched bearish as traders record losses.
The MACD line has dropped into the negative zone, indicating that the sellers are gaining control.
The RSI of 41 is below the neutral 50, suggesting a growing bearish bias.
If the selloff continues, BTC could retest the support and Transactional Liquidity (TLQ) region at $90,285 in the next few hours.
An extended bearish trend could see BTC drop below $89k for the first time since January 2nd.
However, if the support and TLQ level hold, BTC could bounce back towards the 4-hour Inducement Liquidity (ILQ) level at $93,319.