Key Points
- The Bitcoin Rainbow chart entered the “buy” zone after the 2020 and 2024 halvings, mimicking previous trends.
- Market indicators and on-chain metrics suggest a potential price decline in the near future.
Bitcoin investors have recently experienced a dip in confidence as the cryptocurrency struggles to exceed a $69k value. Despite this, the Bitcoin Rainbow Chart indicates that Bitcoin (BTC) is following a similar trend to its 2020 post-halving phase.
Bitcoin’s Price Volatility and Investor Confidence
The volatility of Bitcoin’s price has seen a decrease in recent days. This has posed a challenge for the cryptocurrency, which has been unable to surpass the $69k mark. However, a closer look at the Bitcoin Rainbow chart reveals a pattern similar to the post-halving period of 2020.
Analysis of this chart shows that after the third halving, Bitcoin moved into the “BUY” zone. The price of the coin then soared after a few months within this zone. A similar trend was observed in the 2024 Rainbow chart, suggesting that this could be a prime opportunity for investors to purchase Bitcoin at a lower price before it ascends into the accumulate and HODL zones.
Investor Activity and Market Indicators
An examination of Bitcoin’s on-chain metrics revealed a drop in Exchange Outflow last week, following a spike on May 24th. The Supply on Exchanges increased, indicating that investors were more inclined to sell. Data from CryptoQuant showed a high net deposit on exchanges compared to the seven-day average, suggesting a rise in selling pressure.
Furthermore, Bitcoin’s Coinbase Premium was in the red, indicating a dominant selling sentiment among U.S. investors. This rise in selling pressure could potentially lead to a price correction. The Bitcoin Rainbow chart’s aSORP was also in the red, suggesting that more investors are selling at a profit, which can indicate a market top during a bull market.
At the time of writing, Bitcoin’s fear and greed index stood at 74, indicating a “greed” phase in the market. When the metric reaches this level, it usually suggests a price correction. Most technical indicators also appeared bearish, with the MACD showing the possibility of a bearish crossover and the Relative Strength Index (RSI) indicating a potential price drop. However, the Chaikin Money Flow (CMF) remained bullish as it trended upwards.
