Bitcoin (BTC) reached a new all-time high of $72,800 on March 11, demonstrating the strength of the crypto market. BTC started the day at $69,032 and rose 5.7% to reach its new year-to-date high on Monday. However, this impressive performance has raised concerns about a potential sell-off triggered by profit-taking at higher levels. Several technical and market indicators suggest that a correction in BTC’s price may be imminent in the short term.
One indicator that points to a possible price correction is the TD sequential indicator, which has flashed a sell signal on the 12-hour timeframe. Independent analyst Ali noticed that BTC was trading above $71,700 and warned that a reversal could be on the horizon. The TD sequential indicator, which predicts short-term trend reversals based on changes in intraday highs and lows, suggests that BTC’s price could drop by as much as 3.5% to around $70,000.
Another indicator of overheating in the Bitcoin market is the appearance of “overheated signals.” Since the “sell-the-news” effect of spot Bitcoin ETFs faded on January 23, BTC has been on an “up only” trend. These new BTC investment funds have seen significant capital inflows, with assets under management reaching $55.3 billion on March 11. However, analysts at CryptoQuant warn that despite reaching new all-time highs, BTC could experience major corrections soon. The firm highlighted metrics such as miners being overpaid and traders’ unrealized profit margins reaching 57%, which historically indicate upcoming corrections.
Data from IntoTheBlock shows that 100% of Bitcoin holders are currently in profit, increasing the likelihood of profit-booking sell-offs in the short term. Additionally, BTC’s Relative Strength Index (RSI) is displaying overbought conditions on multiple timeframes. Coinglass’s heatmap shows overbought conditions in four out of five timeframes, with higher intervals displaying higher RSI values. TradingView data also confirms BTC’s overbought conditions on various timeframes. Overbought conditions typically indicate a potential correction in the price trend.
The Crypto Fear and Greed Index, provided by Alternative, currently stands at 82, indicating “extreme greed” conditions. When investors become too greedy, the market is usually due for a correction. It’s worth noting that the last time this index was above 80 was during the 2021 bull market when BTC dropped from its all-time high of around $69,000 to $15,000 during the 2022 bear market.
While these indicators suggest the need for caution and risk management, it’s important to remember that RSI conditions do not guarantee a trend reversal. Crypto prices are highly volatile, and BTC could continue to rally due to increasing demand and the upcoming supply halving.
Please note that this article does not provide investment advice or recommendations. Readers should conduct their own research before making any investment or trading decisions.