As a seasoned researcher with over a decade of experience in the financial markets, I have seen countless bull runs and bear markets, and I must admit, this Bitcoin rally has been quite intriguing. The recent price surge from $57630 to $64000 is indeed impressive, but my on-chain analysis and derivatives market data suggest a cautious approach for the coming week.
A surge in Bitcoin‘s price over four days has rekindled optimism in the cryptocurrency sector. The Bitcoin value soaring from $57630 to $64000, which represents an 11.3% rise, is primarily fueled by anticipation about the Federal Reserve reducing interest rates, now estimated at 4.75% to 5%. Although this optimism may prolong a bull market, analysis of on-chain and derivative market data indicates a need for caution in the upcoming week.
Key Warning Signs for Bitcoin Bulls Heading into Next Week
At the time this article was published, the price of Bitcoin had reached $63,169 and held a total market value of around $1.24 trillion. This upward trend is largely due to the Federal Open Market Committee’s decision to lower interest rates by 0.5% during their meeting on the previous Wednesday. As the Bitcoin price remains above the $60,000 mark, there has been a noticeable surge in future open interest to approximately $34 billion, according to data from Coinglass.
As more traders join the market and establish fresh positions, the OI value tends to climb, often mirroring this trend. Yet, it’s important to note that the propensity for risk-taking among these traders might escalate market turbulence, potentially leading to a slight pullback or correction.
Additionally, based on Cryptoquant’s data, the estimated Bitcoin leverage ratio has reached a fresh annual peak at 0.21. This suggests that traders are borrowing more money to buy Bitcoins, implying an increase in debt financing. In this highly-leveraged market, a small decline in Bitcoin price might lead to forced liquidations among aggressive buyers, amplifying the selling pressure and potentially causing a deeper correction.
To elaborate, the current 30-day Bitcoin Market Value to Realized Value (MVRV) ratio is at 5.8%, signifying that recent Bitcoin buyers are currently booking profits. This high MVRV level points towards optimistic sentiment among Bitcoin holders; however, it may also indicate a tendency for profit-taking actions. In the past, when the MVRV ratio rises into the 6-10% range, it has frequently signaled an upcoming bearish trend and the formation of a short-term Bitcoin peak.
BTC Price 3% Away From Major Breakout
Over the past fortnight, the Bitcoin price forecast has demonstrated a strong rebound pattern, climbing from approximately $52,546 to around $63,000. This represents an increase of nearly 19.85%. If current buying trends continue, the coin is only about 3.4% away from attempting to surpass its weekly resistance at $65,000.
Based on the technical analysis, the indicator suggests a positive trend since the Relative Strength Index (RSI) has risen above the 60% threshold. If buyers are able to transform the current resistance into potential support, Bitcoin’s price might soar towards its record-high resistance level of around $73,750.
If the $65,000 breakout doesn’t occur as expected, the ongoing consolidation might stretch well into the fourth quarter instead.
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2024-09-20 20:53