Charts show bitcoin is on a path to new highs but could see more steep corrections
Bitcoin saw a 10% drop this week after reaching a new intraday record. It could be in for more gains, according to analysts. The flagship cryptocurrency stepped over its previous record of $68,982.20 to $69,210 on Tuesday and immediately corrected — a move that was expected by analysts . And while there’s still potential for more damage, investors should consider them healthy pullbacks as bitcoin continues on a path to even bigger gains this year. Since bitcoin’s break through $57,000 last week, it’s been testing a final resistance level $64,900, according to Fairlead Strategies. The firm looks for two consecutive weekly closes above that level to confirm the breakout. “A breakout would be a long-term bullish development, leaving no resistance left,” Fairlead’s Katie Stockton said in a note this week. “Long-term momentum is positive, and there are no signs of long-term upside exhaustion.” Nevertheless, bitcoin support is at about $48,100, which would be a nearly 30% drop from where the cryptocurrency was trading Thursday – and Stockton said there’s a chance bitcoin flashes a sell signal next week. That support level is slightly higher than bitcoin’s short-term realized price of $42,700, according to CryptoQuant, which represents the average cost at which different holders purchased their bitcoin. The short-term realized price acts as a ceiling in bear markets but as a floor in bull markets. JPMorgan also suggested last week bitcoin could fall to the $42,000 level “once bitcoin-halving-induced euphoria subsides after April.” On top of that, CryptoQuant shows traders’ unrealized profit margins are now above extreme levels at 52% — a 20% increase from last week. Julio Moreno, head of research at the crypto data provider, explained that this indicator acts as a price correction signal when it rises above 40%. Additionally, Moreno pointed to data indicating bitcoin is in an “‘overheated bull’ phase, that miners are in “overpaid” territory and that short-term bitcoin holders are starting to sell to realize their high profit margins as evidence of the potential for more corrections. “This is where we could start seeing the market grind within a narrow range through the next few weeks, as we reckon with both seasonals and some important macro events,” said David Duong, head of institutional research at Coinbase.
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