Bitcoin Experiences 5% Dip: Short-term Correction or Sign of Overheating?
Summary:
Bitcoin (BTC) experienced a 5% decrease in price over 24 hours, trading at $41,645 as of December 11. Despite the dip, technical and blockchain data indicate Bitcoin's resilience with continued efforts to elevate the price above $44,000. On-chain data firm Cryptoquant suggests the price drop could be due to overheating after Bitcoin's rally above $40,000, while Lookintobitcoin reports potential buyer exhaustion. Current resistance around the $44,000 mark is slowing Bitcoin's recovery. However, investment trends from cryptocurrency intelligence firm, Santiment, show a stronger inclination to hold Bitcoin rather than sell, indicating a potentially short-term correction with expected uplift in the near future.
In the last day, Bitcoin's (BTC) value has diminished by 5%, bringing the exchange rate down to $41,645 as of December 11. Although the recent downturn presents a startling decrease, various metrics and blockchain evidence suggest a certain resilience within Bitcoin, with enthusiasts endeavouring to uplift the rate back beyond the $44,000 mark.
The precipitous 7.2% drop of Bitcoin to $40,300 on Coinbase has sparked a conversation among market watchers. Cryptoquant's research chief, Julio Moreno, noted that the landmark digital currency's value seemed to be overheating, following its recent surge past the significant $40,000 mark.
Looking further into the Bitcoin blockchain data reveals some signs of market fatigue. Referring to a December 2023 report by Lookintobitcoin, the price of Bitcoin has attained its short-term target according to the Crosby Ratio, a golden ratio multiplier indicator. This suggests that Bitcoin's value is overstretched, marking the need for a slowdown or correction.
Bitcoin's Relative Strength Index (RSI) indicates that the cryptocurrency was extremely overbought for a period from December 5, particularly when the value rose past $40,000. This is interpreted as a possible early flag that buying enthusiasm could dwindle as traders witness the rally potentially losing momentum, leading to them to possibly opting for profit-taking.
The current correction in the Bitcoin market is due to robust resistance around the $44,000 mark. Data from the Lookintobitcoin’s golden ratio multiplier target reached around $44,000, which has been a barrier for Bitcoin, preventing a convincing break in recent days.
Bitcoin seems to face sturdy opposition from this congested seller's zone, making it a significant challenge for Bitcoin supporters. The firm resistance at $44,000 is marked by IntoTheBlock's In/Out of the Money Around Price (IOMAP) model, signifying that if Bitcoin's price surges beyond this point, it may provoke robust selling from those settling their scores.
Evidently, the current price decline could be a Trojan horse, digging a pit for bears whilst the overall bullish swing through the past months remains solid. In fact, Santiment, a crypto-market intelligence firm, reveals that outflows from Bitcoin exchanges are on the rise, indicating a greater desire for holding rather than selling, a promising sign for Bitcoin.
Essentially, the recent decline to around $40,000 could be an ephemeral market correction, allowing traders to buy-in before the price increases again. From a technical perspective, Bitcoin's price remains above the primary moving averages, suggesting an upward market trajectory.
The Moving Average Convergence Divergence Indicator (MACD) is still positive, hinting that market conditions favour an upward trend. This suggests that the Bitcoin price could likely rise from its present level, with a clear break above the $44,000 mark potentially carrying the cryptocurrency's sails to the golden mark of $50,000. It is expected to occur just in time for New Year, with the U.S. Securities and Exchange Commission is set to make a decision on Bitcoin exchange traded-fund applications, or by spring 2024, in time for the next Bitcoin halving event.
This article does not serve as investment advice. All investments come with risks, and it is recommended that individuals conduct their own research before making any financial decision.
Published At
12/12/2023 12:56:06 AM
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