What happens to Bitcoin after 9% dip? Analysts explain
The price of Bitcoin fell by 9% in just 2 hours and recovered quickly. Analysts are now divided on BTC’s direction in the near future.
The decline occurred as the major futures exchanges, such as Binance Evolution, experienced large liquidations across the board.
In general, traders remain optimistic about the medium term as Bitcoin has surpassed its record high. In the short term, however, technical analysts tend to be cautious as BTC shows signs of peaking.
Two factors make a major Bitcoin crash likely
In the short term, there are two main reasons why a deeper correction could occur.
First, BTC faces strong resistance at $19,400 and $20,000. The recent retest at $20,000 met with a strong sell-off.
Second, volumes in the Bitcoin market are beginning to shrink, reducing the likelihood of a sharp breakout above $20,000.
A pseudonymous trader known as „Beastlorion“ believes that the recent rejection makes a sustained recovery above $20,000 less likely. The trader:
"IMO, it makes most sense for $BTC to fall back on support before it actually breaks through the $20,000. It is a little too far-fetched to go above $20,000 now on a sustained basis. If he retreats, this will serve as a spring for the following rally."
The downward market trend coincides with unfavourable volumes on the major spot exchanges. For BTC to break its all-time high, strong volume is needed to support the uptrend.
However, a trader named „Byzantine General“ comments: „Volume analysis shows that the volume on the way to $20,000 was lower than in previous rallies. The trader on this:
"Some volume analysis. You look at the aggregated spot volume. We took out the local high, but the volume was much lower than in the previous rally. It really got going during the dumping. The volume could have told you that the rally was not real."
Bitcoin would need to identify three key trends in the near future to rise above $20,000. These trends are increasing volume, the restoration of open interest in the futures market and consolidation above $19,000.
What the on-chain metrics show
Typically, the chain internal movements show the general Bitcoin market trend.
According to Rafael Schultze-Kraft, Glassnode’s CTO, Bitcoin tends to peak when the number of profitable BTCs moved in the chain reaches 65%.
Recently, the indicator reached 65%, and shortly after that, a decline followed. This could increase the probability of a short-term relief rally. The analyst:
"How many Bitcoins that were moved on-chain are in profit? Great indicator to detect local highs when the return is above 65%. It looks like the recent reversal has only led to a slump from $19,000 to $17,000 - and has moved back up again. Is there more upside potential here? I am looking closely."
It remains to be seen whether Bitcoin’s rise from $18,200 to $19,400 in one day was the recovery rally. BTC is currently trading above $19,000 again, which indicates that the momentum has picked up.