Will the Bitcoin bull run be followed by a massive correction? – What speaks for or against

• Key metrics indicate overvaluation of the Bitcoin price
• Expert warns that Bitcoin ETFs have too much influence
• Are experts assuming correction?

These metrics indicate overvaluation

The Bitcoin price has experienced a bull run in the past few weeks. The main driving force behind this was that the US regulatory authority SEC approved the first Bitcoin spot EFTs this year. However, some metrics now suggest that there could be a correction in the Bitcoin price.

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The Relative Strength Index (RSI) measures the intensity and speed of price changes, making it possible to identify overbought market conditions in Bitcoin, as BTC-ECHO explains.

Bitcoin recorded continuous gains after the FTX collapse in November 2022, where the MVRV Z-Score was -0.24. Almost a year later, the index broke through 1 for the first time, indicating that Bitcoin has been overvalued by this definition since November 2023. The MVRV Z-Score, as Glassnode explains, is used to assess when an asset is over- or undervalued relative to its “fair value,” highlighted by the deviation between its market capitalization and realized capitalization.

Due to the recent increase, the Relative Strength Index (RSI) is also seeing an increase. According to data from Glassnode, the RSI value for Bitcoin is around 69 points as of February 22, 2024. As can be seen from the data, caution is advised when the RSI value exceeds 70. If the positive trend continues over the next few weeks, it could signal an impending correction, explains BTC-ECHO.

The on-chain crypto analysis platform Sentiment also explains via X in a thread that the data indicates overvaluation. However, according to the analysis platform, it is not certain that the overvaluation will result in a correction.

“Based on average trading returns, many assets have understandably posted strong gains since markets began booming in mid-October 2023. Aside from a few lagging #altcoins, the vast majority of #crypto projects have generated profits for the average wallet in the medium to long term . This means that our model is showing a fair number of “overbought” signals. This certainly doesn’t mean that #cryptocurrency is on the verge of a massive correction. But based on history, the highly respected MVRV metric shows that there is higher risk than average in #buying or opening new positions as markets are in the midst of a 4+ month advance.”

?? Based on average trading returns, many assets have seen understandably high profits since markets began booming all the way back in mid-October, 2023. Outside of a few lagging #altcoinsthe vast majority of #crypto projects have generated profits for the average

(Cont) ?? pic.twitter.com/ziKhzmcz1v

– Santiment (@santimentfeed) February 20, 2024

Expert warns: ETF influence is too great

On February 15, “direct” Bitcoin index funds (ETFs) recorded nearly half a billion dollars in inflows, adding to their impressive performance over the past week.

Despite this positive development, some observers are concerned because ETFs are now taking significantly more BTC out of circulation than are being put into circulation. The CryptoQuant analyst, known as Venturefounder on the short news platform

He predicts: “If capital inflows into Bitcoin ETFs normalize, the next downturn could be 20-30%.” In a previous post, he already pointed out potential bottoms for BTC, which could reach as high as $34,000 in a worst-case scenario.

Possible scenarios if #Bitcoin ETF demand dries up in the next few weeks (by mid March 2024), and a correction does come:

Applying both 2021 #BTC local top fractals

First pump to $58k, then correction could stop at any of these levels: $52k, $47k, $42k, $38k, $34k (worst case) pic.twitter.com/OVmlTyJVr0

– venturefound?r (@venturefounder) February 16, 2024

Do experts expect a corrective movement?

After Bitcoin recently reached above $52,000 for the first time in 26 months, analysts at Swissblock suggest in a market update that the slowing momentum could indicate a possible “immediate” decline before reaching higher prices, according to CoinDesk reported. According to experts, the $52,000 mark represents a significant resistance level on long-term charts. This level therefore already limited prices in September and December 2021 and now represents a significant obstacle to the continuation of the rally.

Analysts at Swissblock note that a pullback could be imminent due to the rapid rise in recent weeks. In their view, this indicates an unsustainable rally. However, the market is prepared for higher prices beyond a short-term decline. Any upcoming correction could be viewed as a buying opportunity as long as Bitcoin maintains its support at around $47,500, the report said, according to Coindesk.

Institutional crypto exchange FalconX also noted “extraordinary” trading volumes supporting the upward trend in early 2024, which was last seen during the regional banking crisis in March 2023, CoinDesk notes.

“Price increases followed by lower volumes have historically been a reliable indicator of false breakouts in cryptocurrencies,” FalconX analysts wrote. “The good news at this point is that liquidity conditions remain generally robust around the January rally.”

Markus Thielen, an analyst at 10x Research, recently stated that Bitcoin may be targeting a price direction of $57,500, according to CoinDesk. He justified this with the robust liquidity and growing interest in Bitcoin futures.

Whether there will be further growth or a correction in the Bitcoin price remains to be seen.

Editorial team finanzen.net