Bitcoin [BTC] has had an impressive rally over the past week, with its price soaring above $68,000, marking a significant milestone in its bull run. However, a bearish divergence has now appeared on Bitcoin’s price chart, signaling that a price correction might be on the horizon, potentially pushing the cryptocurrency to $66,000, or even lower to $62,800. Let’s dive into the metrics driving Bitcoin’s recent performance and what this divergence could mean for its near future.
Bitcoin’s Recent Rally and Strengths
Bitcoin’s rise above $68,000 comes as no surprise given the crypto’s strong fundamentals. According to CoinMarketCap, BTC appreciated by more than 9% last week, driven by several key factors that have created a bullish environment for the cryptocurrency.
One of the major factors behind Bitcoin’s rally is the significant reduction in its supply on exchanges. This metric has dropped to a 5-year low, indicating that investors are moving their BTC into cold storage or wallets, reducing sell pressure. This signals strong buying sentiment, hinting that traders expect prices to go even higher in the near future.
Moreover, Bitcoin’s Open Interest has surged, reaching $20 billion just 8% below its all-time high (ATH). Rising Open Interest is a crucial indicator, as it suggests that traders are confident in the continuation of the current price trend. The inflow of $2.1 billion into exchange-traded funds (ETFs) over the last five days only adds fuel to the bullish sentiment.
In addition, Satoshi Club, a well-known X handle (formerly Twitter) that covers crypto updates, highlighted that BTC’s supply held by addresses that bought in the last 12 months is at a 2-year high. This surge in holdings reflects growing confidence among newer investors and institutions, a trend largely driven by the inflows into ETFs.
While Bitcoin’s recent performance has been impressive, the appearance of a bearish divergence could signal a potential price pullback. Ali, a respected crypto analyst, warned of this in a recent tweet, stating that the divergence suggests a short-term correction could be imminent.
But what is a bearish divergence? In technical analysis, a bearish divergence occurs when an asset’s price reaches new highs, but its momentum indicators (such as the RSI or MACD) fail to do so, indicating weakening momentum. This divergence often precedes a reversal or correction in the asset’s price.
Bearish Divergence: What Does It Mean for Bitcoin?
Key Metrics to Watch
Several on-chain metrics back the possibility of a correction:
1. Binary CDD (Coin Days Destroyed)– The binary CDD was green, indicating that long-term holders have not moved their coins significantly in the last seven days. This implies that long-term holders still have strong faith in Bitcoin’s future performance and are choosing to hold rather than sell.
2. aSORP (Adjusted Spent Output Profit Ratio) – The aSORP metric shows that more investors are selling at a profit. Typically, in a bull market, this can indicate that a market top is forming as traders take profits, adding pressure to the market.
3. NULP (Net Unrealized Profit/Loss) – The NULP metric suggests that investors are experiencing high unrealized profits, which can lead to a psychological shift. Investors may start to believe they’ve reached the peak and sell to lock in gains, further contributing to a potential correction.
Where Could Bitcoin Go Next?
In the event of a price correction, analysts are watching critical support levels that could act as a floor for Bitcoin’s price. Based on technical analysis, BTC could drop to around $66,000, a strong psychological and technical support level. However, if the market sees increased selling pressure, a further decline could push Bitcoin down to $62,800.
While this potential correction might be unsettling for short-term traders, long-term holders and institutional investors remain optimistic, betting on Bitcoin’s growth as part of the larger narrative of digital asset adoption and institutional involvement.
The Bigger Picture: Bitcoin’s Long-Term Outlook
Even though a price correction might be on the horizon, Bitcoin’s long-term fundamentals remain strong. The drop in supply on exchanges, growing institutional interest, and expanding use cases in industries like decentralized finance (DeFi) and cross-border payments all point toward continued growth for cryptocurrency.
In the longer term, Bitcoin is expected to remain a key player in the digital currency space, especially with institutional adoption accelerating and ETFs gaining traction. Investors should consider these short-term fluctuations as part of the normal market cycle, with corrections providing opportunities for strategic entries.
Conclusion
While Bitcoin’s recent rally to $68,000 is exciting, the bearish divergence suggests a short-term price correction could be imminent. With strong support at $66,000 and $62,800, Bitcoin may see a pullback before continuing its long-term growth. Investors should stay informed, watching key metrics like Open Interest, aSORP, and exchange supply.
