Bitcoin has returned to the $40,000 levels as it bounced back from the high area of around $30,000. The first crypto by market cap managed to hold off the bears and retraced some of this week’s losses.

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At the time of writing, BTC’s price trades at $40,200 with a 3% profit in the last 24-hours.

The general sentiment in the market seems pessimistic as Bitcoin remains rangebound in higher timeframes. The cryptocurrency has been trading in the $30,000s to the $60,000s area, and in a tighter range over the past months.

Unable to break above local resistance, located at $45,000 and $48,000, market participants seem to have lost conviction over short-term appreciation unless BTC’s price can break above those levels.

According to a recent market update posted by Material Indicators (MI), in the current BTC’s price range, the area between $36,500 and $40,500 is the most critical. These levels operate as a consolidation range and as a zone that has a “marked prior accumulation phase and distribution”.

In other words, those levels have been important for Bitcoin because they provide clues on potential price action. As seen below, since 2021, when the cryptocurrency reaches these levels either trends upwards to the top of its range (around $69,000) or goes lower to re-test support.

In order to discover BTC’s current phase, MI analysts looked at the cryptocurrency’s heatmap along with three important moving averages. The first is the 100-day moving average located at around $36,000, the second is the 200 moving average at around $21,000, and the third is the 50-moving average at around $45,000.

Showing the chart below, the analysts said:

Zooming in slightly to the 3 Day chart reveals that 3-Day 50MA crosses below the 100 3-Day MA have triggered rallies and interaction with the 3-Day 200 MA has either led to a rally or breakdown to the macro bottom. BTC has checked all of those boxes this week.

The macro-economic outlook spells further losses for Bitcoin and other risk-on assets. Therefore, the analysts said the situation could get “worse”.

Material Indicators stated that BTC’s current price action could be a way for large investors to increase their short positions before a re-test of the macro bottom around the 200-day moving average. Therefore, they advised market participants to be cautious. They added:

Until #BTC reclaims the key moving averages these are considered distribution rallies used to sell the rip or add to short positions. Expect more volatility coming into the Monthly close/open.

From MI’s analysis, leverage traders should be careful of upcoming volatility or should check their expectations of an immediate reclaim of the top of the range.

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At the same time, a large portion of the market seems to be expecting more downside. An increase in short positions could make these participants vulnerable to a long-short squeeze and push Bitcoin into previous highs.

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