Bitcoin (BTC) is currently undergoing a significant correction phase after experiencing a strong price rally in 2024. The BTC/USD pair is down approximately 13.5% from its year-to-date and all-time high of nearly $74,000.
The ongoing price decline in Bitcoin appears to be a correction in the bull market, allowing the market to adjust and consolidate gains before potentially moving higher again. Previous bull market corrections in the Bitcoin market have seen prices decline by 20-40%, indicating the possibility of similar downturns during the 2024 bull market.
Bitcoin’s recent price explosion has left the market in an overbought state. The weekly Relative Strength Index (RSI) for Bitcoin stood at around 77 as of March 22. An RSI above 70 typically suggests overbought conditions, indicating a potential price correction as traders may sell off their holdings. Historical data shows that when the weekly RSI levels are above 70, prices tend to correct towards the 50-week exponential moving average (50-week EMA). The Bitcoin chart from the 2020-2021 bull run demonstrates a similar downturn.
In 2024, Bitcoin’s price trajectory seems to be on an upward trend, targeting the ascending trendline resistance at around $84,000 by April or May. However, after reaching this potential peak, there is a significant chance that Bitcoin will pull back towards its 50-week EMA, which is near $40,000. This suggests a corrective phase similar to that of 2020. In other words, BTC’s price risks dropping by 35% by June from its current price levels of around $64,350.
Further signals for a potential Bitcoin price crash come from its Net Unrealized Profit/Loss (NUPL) data. NUPL represents the difference between market cap and realized cap divided by market cap. An NUPL reading above zero indicates investors are in profit, and an increasing trend suggests more investors are starting to profit. The NUPL data for Bitcoin has reached 0.64, a level that has historically preceded rising profit-taking sentiment and sharp price drops.
Analysts have differing views on Bitcoin’s future. Rekt Capital argues that Bitcoin is in a “Danger Zone” following its recent price drop, which aligns with the region where Bitcoin has historically experienced retracements before its halving events. Rekt Capital anticipates Bitcoin’s price to drop towards the $40,000-42,000 range before the halving in April. On the other hand, popular trader Aksel Kibar predicts that Bitcoin’s price will stabilize around $57,500, coinciding with the upper trendline of its previous ascending channel trend.
It’s important to note that this article does not provide investment advice or recommendations. All investment and trading decisions involve risks, and readers should conduct their own research before making any decisions.