Key Points
- Bitcoin’s recent surge has some analysts predicting a potential market correction.
- Four main reasons for a possible correction include investor greed, profit realization, technical indicators, and overvaluation.
Bitcoin’s [BTC] value has seen a significant increase of 34.39% over the last month, reaching an all-time high of $93,483 from a previous low of $66,798.
However, some market analysts, including Ali Martinez, predict a potential steep correction for Bitcoin.
Analyst’s Reasons for Potential Correction
Martinez identifies four reasons for a potential decline in Bitcoin’s value. The first is the extreme greed displayed by Bitcoin enthusiasts, as evidenced by a greed index of 90%.
Increased Google search interest in Bitcoin among retail investors is another sign of this greed. Though this could indicate further capital inflow, past trends show that spikes in search interest often align with price declines.
The second reason is the realization of $5.42 billion in profits by savvy BTC investors, leading to a rise in the sell-side risk ratio as investors sell to maximize profits.
Thirdly, the TD sequential indicator presents a sell signal on daily charts, suggesting an exhausted uptrend and potential trend reversal. Finally, the RSI indicates that Bitcoin is in the overbought territory at 75.91, suggesting possible overvaluation and decreasing buyer momentum.
Bitcoin Chart Analysis
Despite Martinez’s cautionary analysis, it’s crucial to consider other market indicators. Our analysis also suggests a potential pullback, with Bitcoin possibly being overvalued.
For instance, Bitcoin’s MVRV ratio has been on a steady uptrend, reaching a high of 2.5. Historically, high MVRV values often precede price pullbacks as early investors sell to secure profits.
Moreover, Bitcoin’s NVT ratio has surged from 14 to 44, indicating a speculative price rise without corresponding growth in the network’s value. This implies that Bitcoin’s prices could decline to match its actual market demand.
If Bitcoin’s value does decline, it could find its next support around $87140. However, if the $9100 support holds, Bitcoin could continue its uptrend towards $100k.
