Key Points
- Bitcoin’s recent price drop has led some analysts to suggest traders might want to stay sidelined.
- A further drop could see prices falling by nearly 15%, potentially reaching $52k.
Bitcoin [BTC] experienced a 7.46% drop from its recent high set on 30 April. At the time of writing, it was trading just above $59.9k, within the demand zone of $59.2k-$61k.
The Danger Zone
Crypto-analyst Rekt Capital has suggested that Bitcoin is not yet out of the danger zone. The analyst compared the current Bitcoin price movement with the 2020 and 2016 cycles, occurring post-halving. While history might not repeat exactly, it often rhymes.
Rekt Capital suggested that the 2024 price action after the halving was more similar to 2016 than 2020. Back then, an 11% downward wick happened 21 days after the halving. If the same pattern were to occur, we could see BTC prices plunging to $52k.
Support Zone Weakening
The $60k region has been a technically sound support zone over the past two months. However, each retest of the support weakens it. This might be the wave that breaches it. Until then, buyers could look to buy the dip.
Many traders might prefer staying on the sidelines to wait for a positive reaction, or a drop below the $59k mark to go short. The spot CVD has given investors a reason to be worried. It has been in a downtrend since mid-March and broke beneath a support level that stretched back to late February.
This confirmed the bearish strength on the HTF, and reduced the chances of another bounce from the $60k demand zone. The Open Interest was also in decline and outlined bearish sentiment.
The adjusted spent output profit ratio (aSOPR) saw a significant upward move to 1.1 a month ago but has fallen to 1.029 at the time of writing. In May and August 2020, a similar scenario played out.
Once the overeager bulls were forced to deleverage, the market saw a more sustainable rally, supported by spot demand. The estimated leverage ratio jumped past 0.18 multiple times in 2024 but was forced to fall back. This showed that overleveraged positions have mostly been wiped out by the latest drop.
However, this does not necessarily mean BTC will see a positive price reaction. A move below the $59.4k mark will likely see prices fall to the $55k and $52k support zones.
