• Is Bitcoin Set for a Correction After Breaking the $60k Level? Analysis of the Bitcoin Price

  • BTC has been gaining ground recently, owing to the anticipated launch of the futures-backed ETF early next week. It closed at $61.6k on Coinbase with more than double the daily average volume, indicating strong spot buying.

    Possible BTC Correction?

    Although the short-term price action has been very bullish, with a strong breakout above $52.9k in the last two weeks, we must proceed with caution with the BTC ETF launch. Because BTC has rallied 58 percent in just a few weeks in anticipation of the BTC ETF news, the risk of a near-term pullback is increasing.

    Stocks in traditional markets tend to fall in the days leading up to or on the day of the anticipated announcement as traders take profits. Bitcoin is not immune to the “buy the rumor, sell the news” pattern, as there have been numerous sell-offs, most recently with El Salvador’s adoption of BTC as legal tender.

    The overall trend in fundamentals, technicals, and on-chain metrics for BTC remains firmly bullish in the medium to long term, but it’s important to be aware of the near-term risks.

    As BTC has rallied significantly in recent weeks, open interest, funding rates, and the estimated leverage ratio have all risen slightly. Although these levels are not as extreme as those from March to May 2021, there is always the risk of a liquidation event, which could trigger a near-term pullback, particularly if the BTC ETF becomes a sell the news event.

    A sell-the-news event is actually beneficial to the overall market structure because it helps to make the rally to all-time highs and higher more sustainable. Bull markets experience multiple shake-outs, during which the structure is formed, making the overall rally more sustainable.

    In the event that this occurs, near technical support is currently located between $57.1k and $52.9k, with previous levels of resistance now acting as support. BTC must hold these levels, form a higher low, and push higher in order to reclaim $60k and retest previous all-time highs at $64.8k.

    This appears to be the most likely outcome, as on-chain metrics show no signs of aggressive distribution from long-term holders. This is a very bullish signal, indicating that they are not interested in selling BTC even at a price of $60,000.

    Bitcoin miners continue to hold, indicating that they still expect higher prices later this year. Spot exchange reserves have been trending lower in recent days, as strong spot buying has pushed BTC higher.

    Bitcoin Price is Expected to Rise in the Long Run

    Although caution should be exercised following a large rally in BTC, the mid to long-term trend remains fully bullish, implying that any near-term sell-off will be accumulated by strong hands, forming a higher low, and leading to bullish continuation.

    We continue to see signs of trade risk returning, which is a macro bullish catalyst for BTC for the cycle. The S&P 500 has most likely formed a double bottom, displaying bullish divergence and now reclaiming key technical levels. The dollar continues to fall below resistance, as money continues to flow out of long-term bonds, indicating that money is shifting back into risk assets such as stocks and Bitcoin.

    Despite the possibility of a near-term correction, the improving fundamentals, technicals, on-chain, and macro conditions continue to favor BTC over the course of the bull market cycle.

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