- Bitcoin experienced a significant price correction after rallying above $40,000, with on-chain data suggesting an ‘overheating’ market.
- Despite the correction, Bitcoin shows strength with potential resistance around $44,000 and indicators of sustained bullish trends.
In the dynamic world of cryptocurrencies, Bitcoin has recently undergone a noteworthy price correction, signaling a possible cooling-off period after its rally above the $40,000 mark. This development follows months of consistent growth, bringing a much-needed respite to the overheated market.
On-Chain Data Highlights Market Overextension
Bitcoin’s sharp decline from $44,034 to $41,649 within a span of six hours has brought to light the market’s overextended state. Julio Moreno, head of research at CryptoQuant, noted that the flagship cryptocurrency was ‘overheating’ post the recent rally. Furthermore, Lookintobitcoin’s data aligns with this assessment, indicating that Bitcoin’s price has hit its golden ratio multiplier near-term target. This Crosby Ratio underscores the cryptocurrency’s over-extended levels, necessitating a correction or slowdown.
Some metrics are flagging #Bitcoin price is overheating after the recent rally above $40K (red areas).
1. The Bull-Bear Market Cycle Indicator: overheated bull phase for the first time since July.
2. The miner profit/loss sustainability: block reward growing much faster than… pic.twitter.com/irpVvBSV3G
— Julio Moreno (@jjcmoreno) December 7, 2023
The Golden Ratio Multiplier Effect
The golden ratio multiplier, an indicator assessing Bitcoin’s adoption curve and market cycles, suggests that Bitcoin’s price has reached a state of buyer exhaustion above $40,000. This is corroborated by the relative strength index (RSI), which has indicated an overbought condition since December 5.
Facing Resistance at the $44,000 Zone
Bitcoin’s current market correction can be attributed to the significant resistance encountered around the $44,000 supply zone. The Lookintobitcoin golden ratio multiplier and IntoTheBlock’s
“in/out of the money around price”
(IOMAP) model both highlight this critical resistance level, where approximately 585.77 BTC was previously bought by around 1.43 million addresses.
Prospects of a Healthy Correction
Despite the immediate downturn, this correction phase could serve as a bear trap in an overarching bullish trend observed over recent months. Santiment’s data on Bitcoin’s exchange outflows suggests a bullish sentiment, with investors leaning more towards holding than selling. This implies that the current dip could present an opportunity for traders to buy at lower prices before a potential continuation of the upward trend.
Technical Indicators Suggest Continued Upside
From a technical perspective, Bitcoin’s positioning above major moving averages and the MACD indicator’s positive region suggests a favorable market for bulls. Should Bitcoin successfully surpass the $44,000 resistance level, it could pave the way towards the $50,000 mark, particularly in light of upcoming events such as the SEC’s decision on Bitcoin ETF applications and the anticipated Bitcoin halving in 2024.