Bitcoin Poised to Draw Down?
Ever since falling by $3,000 to $10,400, Bitcoin (BTC) has done its best to get back on its feet. So far, it has done rather well, actually hitting $12,400 earlier this week, which is 20% from the local bottom. As of the time of writing this article, the cryptocurrency sits at $11,700, seemingly finding a foothold in this range.
Despite this short bout of stability, which is a far cry from the volatility seen over recent weeks, some analysts are wary about an impending pullback, one that could bring Bitcoin back to four digits once again, which some say would negate this ongoing swing higher.
Analyst Nunya Bizniz recently pointed out an interesting fractal (a previous bout of price action that plays out at different times) on Bitcoin’s one-day chart. He notes that 2018’s crash and 2019’s strong recovery is looking a lot like the price action seen in 2011 and 2012, which was the crypto market’s first full-fledged cycle.
The commentator isn’t the first to have made this connection, with The Crypto Dog, a prominent analyst followed by over 100,000 individuals, making a tweet noting that today’s market looks more like 2011/2012 than it does 2015.
During this period, Bitcoin rallied to new heights, fell by 94%, saw a rapid bounce by 260%, to then fall by 46%. Bizniz notes that if history is of any indication, Bitcoin could see a 46% decline, which would bring it back to the $7,000 range. This seems absurd, but considering that this rally took the place of only a few months, such a correction isn’t off the table.
This isn’t the only sign that a strong pullback is on the table. A user going by Fatih on Twitter recently noted that Network Value to Transactions Signal, a key Bitcoin on-chain indicator, has suggested that a correction is on the horizon, one that may be “deep” if historical events are of any current relevance.
As he points out, the indicator is now reading higher (meaning more fundamentally overvalued) than it did at 2018’s top, which is evidently not the best sign.
While the two aforementioned analyses don’t exactly reveal that a correction is looming, there are some indicators that suggest the chances of a move under $10,400 is rapidly approaching. As reported by Ethereum World News previously, Financial Survivalism sees a correction to at least $9,000 for seemingly three reasons.
Firstly, a move to $9,000 would give Bitcoin a chance to revisit uptrend support that BTC followed closely from late-April to just two weeks back.
Secondly, the BitMEX funding rate has hit very high levels, implying that longs may need to close their positions, leading to a devaluation of the cryptocurrency. And lastly, the Average Directional Index, a technical analysis indicator meant to determine the strength of a trend, is “looking ready to roll over soon on the daily”, implying weakness.
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