After surging toward the $100,000 mark a few days into the new year, the price of Bitcoin looks set to end January in stark contrast to how it started the month. On Thursday, January 29, the flagship cryptocurrency fell to a multi-month low of around $81,500, with the general market sentiment worsening over the past few weeks.

Going into the weekend, the price of Bitcoin has somewhat cooled off, recovering above the $93,000 level on Friday, January 30. Interestingly, the latest on-chain data suggests that the market leader is only on the verge of another violent price movement.

BTC Setting Up For A Violent Liquidation Cascade

In a Quicktake post on the CryptoQuant platform, CryptoOnchain shared insights into the current on-chain condition of the Bitcoin price. According to the market quant, the Bitcoin Estimated Leverage Ratio (ELR) witnessed a notable upswing on Binance, the world’s largest crypto exchange, while price was undergoing its most recent correction. 

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For context, the Estimated Leverage Ratio is an on-chain metric that tracks the ratio between open interest and the reserve of an exchange (Binance, in this case). This metric measures the average amount of leverage used by the traders in a particular market or exchange. 

A higher ELR signals a higher market risk, suggesting that small price movements could lead to significant liquidations. According to data from CryptoQuant, CryptoOnchain highlighted that the Bitcoin Estimated Leverage Ratio recently spiked to a critical level of 0.188 when the price fell to around $81,500, indicating that the Open Interest is exceptionally high relative to the exchange’s reserves.

Furthermore, CryptoOnchain shared that the divergence between rising leverage and falling prices is a classic “bearish divergence” signal in the derivative market. “It indicates that despite the price weakness, traders are aggressively increasing their leverage positions,” the on-chain expert added.

What’s more, CryptoOnchain revealed that when the market becomes heavily over-leveraged during a price correction, it implies that the traders are either “buying the dip” with high leverage or increasingly taking short positions. The market quant said this setup usually precedes a “violent liquidation cascade.”

Overall, CryptoOnchain concluded that the market is currently in a high-tension zone, with the combination of peak leverage and low prices suggesting that a “squeeze” is imminent. The analyst, however, clarified that the direction of the next violent movement depends on the dominant side (bulls or bears)  of the market. 

Bitcoin Price At A Glance

As of this writing, the price of BTC stands at around $84,200, reflecting a nearly 1% jump in the past 24 hours.

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Featured image from iStock, chart from TradingView

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There is a large amount of Bitcoin estimated to have been lost over time, but not much has been said about the amount of Ethereum lost as well. This might come down to the fact that Bitcoin has a much lower limited supply compared to Ethereum. Hence, the possibility of so many lost coins does not have much of an impact on its value compared to that of Ethereum, with a much higher supply. Nevertheless, as it is in crypto, there is also a notable number of ETH expected to be lost forever, as outlined by a researcher.

More Than 5% Of Ethereum Supply Gone Forever

In an X report, crypto researcher Conor Grogan revealed that a significant amount of ETH has actually been lost over time. In its 10 years of operation, there have been mishaps and user errors that have led to notable amounts of ETH being locked/inaccessible forever.

The first part of the report focused on instances of user errors that have led to hundreds of thousands of coins being completely lost forever. The researcher pointed to at least 913,111 ETH, worth over $3.43 billion, representing more than 0.76% of the total supply being lost already.

One of these instances is the Web3 Foundation’s Parity Multisig bug that led to 306,000 ETH being locked forever. Then, a faulty contract saw 60,000 ETH from Quadriga being trapped, as well as the Akutars’ NFT mint that saw 11,500 ETH trapped after the mint went awry. Additionally, there is over 25,000 ETH sitting in a burn address that has been sent by users.

The research also includes the infamous Rain Lõhmus wallet, which holds 250,000 ETH in it. The lore around this is that Lõhmus had spent $75,000 to purchase the coins back when Ethereum launched. However, the entrepreneur and LHV Bank founder had lost his keys and has been unable to access the wallet, which now sits at almost a staggering $1 billion.

Moving beyond just user error alone, then the number of ETH that have gone out of circulation shoots up much higher. When Grogan added in the total ETH burned after the implementation of EIP-1554 back in 2021, the figure rose to over 5.3 million ETH. This translates to a dollar value of around $23.5 billion, accounting for more than 5% of the total Ethereum supply.

However, the crypto researcher explains that this still does not include instances of where users have lost their private keys or forgotten Genesis wallets. Taking this into account, the amount of lost ETH is probably much higher, making it hard to pinpoint.

In contrast to Ethereum’s figures, it is estimated that around 20% of the Bitcoin supply is lost forever. Since the Bitcoin supply is capped at 21 million coins, then any lost supply means there is less available supply for investors in the market. This makes lost BTC even more impactful than lost ETH, given that the Ethereum supply is not capped and continues to climb.

Chart from TradingView.com

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Bitcoin price is still consolidating above $29,500. BTC must settle above the $30,400 resistance zone to start a steady increase in the near term.

• Bitcoin is struggling to clear the $30,000 resistance level.
• The price is trading below $30,000 and the 100 hourly Simple moving average.
• There was a break below a key bullish trend line with support near $29,950 on the hourly chart of the BTC/USD pair (data feed from Kraken).
• The pair could start a decent increase if there is a close above the $30,400 resistance.

Bitcoin Price Remains In A Range

Bitcoin price attempted a fresh increase above the $30,400 resistance zone. However, BTC struggled to settle above $30,400 and reacted to the downside.

There was a break below a key bullish trend line with support near $29,950 on the hourly chart of the BTC/USD pair. The pair declined below the $29,850 level but the downsides were limited. The price stayed above the $29,500 support.

A low is formed near $29,591 and the price is now attempting a fresh increase. There was a move above the $29,650 level. Bitcoin price is now trading below $30,000 and the 100 hourly Simple moving average.

Immediate resistance is near the $30,000 level and the 100 hourly Simple moving average. It is close to the 50% Fib retracement level of the recent decline from the $30,405 swing high to the $29,591 low. The first major resistance is near the $30,100 level.

Source: BTCUSD on TradingView.com

The 61.8% Fib retracement level of the recent decline from the $30,405 swing high to the $29,591 low is also near the $30,100 level. The next major resistance is near $30,400. A close above the $30,400 level might start a fresh increase. In the stated case, the price could rise toward the $30,800 level. Any more gains could open the doors for a move toward the $31,200 resistance zone.

More Losses in BTC?

If Bitcoin fails to clear the $30,000 resistance, it could continue to move down. Immediate support on the downside is near the $29,600 level.

The next major support is near the $29,500 level, below which the price could accelerate lower. In the stated case, the price could drop toward the $29,200 support zone.

Technical indicators:

Hourly MACD – The MACD is now gaining pace in the bullish zone.

Hourly RSI (Relative Strength Index) – The RSI for BTC/USD is now near the 50 level.

Major Support Levels – $29,600, followed by $29,500.

Major Resistance Levels – $30,000, $30,100, and $31,400.

Last year, Solana (SOL), a popular cryptocurrency, increased by more than 11,000%.

You may be wary of investing in a cryptocurrency who has earned such significant profits, concerned that most of the potential growth has already happened.

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Solana’s “wormhole bridge” solely connects its blockchain to Ethereum.

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Solana increased over 10,000% last year, implying that a holder could have transformed $1000 into $100,000 in a matter of months.

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Avalanche (AVAX), Polkadot (DOT), and Dogecoin (DOGE) were all tremendous success stories in 2021 as well, but the holders who gained the most money were those who got in as soon as possible.

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DeFi has emerged as one of the most critical phenomena in the world of cryptocurrencies.

In October 2021, the total value locked up across leading protocols hit a new high of $236 billion.

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