Bitcoin might experience a potential decline of at least 20% in the upcoming weeks following its retest of a technical resistance level held for several months.
The price of Bitcoin (BTC) has experienced a significant recovery, rising by over 19% within three weeks after hitting a two-month low of around $56,550. As of May 20th, it surged to approximately $67,270. Nonetheless, there remains a potential for a sharp correction in the near future.
The recent revival has mainly been driven by indications of declining inflation, subsequently increasing bond traders’ anticipation of a September interest rate reduction rather than one in November. Furthermore, a renewed influx of funds into spot Bitcoin exchange-traded funds (ETFs) has propelled BTC prices upward.
Bitcoin price could slip below $54,000
Bitcoin’s likelihood of experiencing a significant downturn in the near future is considerable, given its recent price movements.
It’s worth noting that the BTC/USD pair has been trading within what seems to be a bull flag pattern since March, when it reached a new all-time high of approximately $73,800. As of May 20, Bitcoin’s price was approaching the upper trendline of the flag, hinting at a possible breakout.
Insufficient trading volume during breakout attempts heightens the likelihood of BTC experiencing a pullback. Consequently, the next potential downward target aligns with the lower trendline of the flag formation, intersecting with the 200-day exponential moving average (200-day EMA), expected around $53,970 by June.
Alternatively, a clear breakout above the upper trendline of the flag pattern may result in a price increase equivalent to the height of the preceding uptrend, in accordance with technical analysis principles.
This action could propel the price of BTC towards $84,000 by June, marking a roughly 25% increase from current levels.
Tether generates $1 billion to address potential demand
Last week, Tether (USDT), the leading stablecoin globally, soared to a record-breaking market capitalization surpassing $110 billion. This surge in demand for “sideline capital” has the potential to fuel Bitcoin’s ascent to new all-time highs in the coming weeks.
The influx of fresh USDT into the market bolsters overall liquidity, resulting in a greater supply of U.S. dollar-pegged stablecoins potentially being directed towards Bitcoin and the broader cryptocurrency market. Notably, these newly created USDT played a significant role in propelling Bitcoin’s price surge from $27,000 to $73,000, as noted by Lookonchain.
The introduction of this new stablecoin supply diminishes the likelihood of a significant Bitcoin crash in the upcoming weeks and months. Nonetheless, as per 10x Research, Bitcoin needs to surpass the resistance level of $67,500 convincingly to set fresh record highs.
Bitcoin’s NUPL suggests a cautious bullish sentiment
As of May 4th, the Bitcoin Net Unrealized Profit/Loss (NUPL) metric stands at 0.54, signaling that a considerable number of BTC holders are currently holding positions with notable unrealized profits.
Typically, when the Net Unrealized Profit/Loss (NUPL) surpasses 0.5, it indicates a confident market sentiment, potentially leading to further price rises. However, it’s crucial to recognize that the NUPL has retreated from its peak of 0.68 in March 2024.
In correlation, a decreasing NUPL is often interpreted as a decline in euphoria, which commonly precedes or aligns with price adjustments. Consequently, based on this on-chain indicator, Bitcoin’s price might experience downturns in the upcoming months.
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