Bitcoin (BTC) is currently undergoing a significant correction phase after experiencing a strong price rally in 2024. The BTC/USD pair has dropped by approximately 13.5% from its year-to-date 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. Similar corrections have been observed in previous bull markets in the Bitcoin market, with prices declining by 20-40%.
Bitcoin’s price explosion has left its market in an overbought state. As of March 22, the weekly Relative Strength Index (RSI) for Bitcoin stood at around 77. An RSI above 70 typically indicates overbought conditions, suggesting that a price correction may occur as traders potentially sell off their holdings. Historical data shows that when the weekly RSI is above 70, strong price corrections towards the 50-week exponential moving average (50-week EMA) have occurred. The Bitcoin chart from the 2020-2021 bull run demonstrates a similar downturn.
In 2024, Bitcoin’s price trajectory seems to be heading towards an upward trend, targeting the resistance of the ascending trendline at around $84,000 in the early months of April or May. However, following this potential peak, there is a significant chance that the price will pull back towards its 50-week EMA, nearing $40,000. This suggests a corrective phase similar to that of 2020. In other words, BTC’s price may drop by 35% by June from its current price levels of around $64,350.
The Net Unrealized Profit/Loss (NUPL) data for Bitcoin also indicates a potential price crash. NUPL represents the difference between market cap and realized cap divided by market cap. An NUPL reading above zero indicates that investors are in profit, and an increasing trend suggests more investors are starting to profit. This phase signifies an increasing reason to take profit, leading to increased sell pressure. Notably, Bitcoin NUPL reached 0.64 earlier this month, a reading that has historically preceded rising profit-taking sentiment and sharp price drops.
Analyst Rekt Capital believes that Bitcoin is currently in a “Danger Zone” following its recent price drop. This area, highlighted in red on the chart, is significant because it aligns with the region where Bitcoin has historically experienced retracements before its halving events. Rekt Capital anticipates that BTC’s price will drop towards the $40,000-42,000 area before the halving in April. On the other hand, popular trader Aksel Kibar predicts that the BTC price will stabilize around $57,500, which coincides with the upper trendline of Bitcoin’s previous ascending channel trend.
It’s important to note that this article does not provide investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research before making any decisions.