Bitcoin is currently exhibiting bearish signals, having crossed below its daily 200-day moving average (MA) and with the daily Relative Strength Index (RSI) plummeting. This has raised concerns about whether Bitcoin can withstand the upcoming storm. Adding to the uncertainty is the upcoming Mt. Gox repayments in July, which could release $8.5 billion worth of Bitcoin into an already volatile market. The question now is whether Bitcoin will find stability or experience further declines.
Bitcoin’s recent crossing below its 200-day MA is not unprecedented. It has happened multiple times in the past, and in each instance, Bitcoin eventually rebounded from the lows. However, the current market conditions suggest a potential for further decline.
In July, Mt. Gox will begin distributing around $8.5 billion worth of Bitcoin to creditors. While some experts suggest that this may not significantly impact Bitcoin’s price, the market may already be feeling its effects. In a worst-case scenario, a drop of 19.2% is plausible. Our analysis indicates that Bitcoin’s price could drop to a support range between $50,856 and $51,985, which is a confluence of multiple Fibonacci retracements and represents strong potential support. This is further supported by the alignment of the 50-day moving average on a weekly timeframe.
Furthermore, other data points to potential volatility ahead. Glassnode’s Sell-Side Risk Ratio indicates market equilibrium but also hints at potential volatility. Expectations for volatility are heightened, with a decline in realized volatility suggesting compression and future volatility. The URPD metric highlights supply concentrations around specific cost-basis clusters, indicating that many investors may be sensitive to price drops below $60,000. Additionally, Bitcoin falling below the On-Chain Trader Realized Price reinforces the bearish outlook.
Despite significant interest from institutional investors, recent data shows declining Bitcoin ETF inflows and increasing outflows, indicating a growing bearish sentiment in the market.
Considering all these factors, it is possible that Bitcoin will remain at lower levels for some time, potentially until September or October. As a strategy, one approach is to dollar-cost average into Bitcoin now and continue doing so if it drops further. Alternatively, one could wait for a potential drop to the $50,000 – $52,000 range to enter a long position. Historically, investing in Bitcoin while it is below the 200-day MA has been a wise long-term decision.
It’s important to note that this article does not provide investment advice and is for educational purposes only.