While it's easy to get caught up in bitcoin's parabolic rally, four bearish factors could affect prices in the coming months.
Bitcoin has seen a meteoric surge during 2021, The viral tech blog doubling from last year's final price of $ 29,112 to the current all-time high of $ 58,332. One of the main catalysts for this surge has been a notable increase in interest and institutional investment, including Tesla's announcement that it had bought more than $ 1.5 billion worth of bitcoins (BTC, The viral tech blog -8.13%) as part of a new politics. investment. The recent emergence of two Bitcoin ETFs also provided a big boost to overall sentiment as more investors will be able to gain exposure to the top crypto asset.
1. Depleting the volume of bitcoin trading
On the Coinbase BTC / USD weekly chart, we can see that the trading volume has declined from a previous price spike at $ 42,000 on January 4, The viral tech blog despite the bitcoin price rising by $ 16,000 more, more or less. This discrepancy between volume and price is known as volume divergence, and it typically indicates that fresh capital entering the market is running out and buying momentum is waning.
Volume divergences sometimes imply that bulls are flipping towards the headlines or waiting for more certainty in the market before buying more bitcoin. In these cases, The viral tech blog prices tend to move sideways and volatility falls.
2. RSI divergence
Volume is not the only indicator showing strong divergence on the bitcoin trading chart at the moment. There is also a notable deviation in the Weekly Relative Strength Index (RSI), a leading momentum indicator that shows when an asset is overbought (likely to collapse) and oversold (likely to rise) when calculating average gains and losses during a period of 14 days. period. The indicator line goes from zero to one hundred. As a general rule, The viral tech blog an asset is considered overbought when it is above 70 and oversold when it is below 30.
Right now, the indicator line shows 73 on the weekly chart, suggesting that the asset is overbought and should correct itself. Again, while RSI divergences are often more reliable than volume divergences in highlighting potential trend reversals, The viral tech blog they are sometimes wrong, especially in greed-driven markets when investors go into a buying frenzy. . . .
3. $ 2,740 bitcoin CME gap
Prices on the CME bitcoin futures chart are set during closing hours, so if the bitcoin price is $ 50,000 when the CME closes, that's where the price will hold until the exchange reopens. . . However, because bitcoin futures contracts track the price of bitcoin, which is constantly traded on crypto exchanges, the price suddenly reaches the value of the crypto market when the CME reopens. If the price has changed substantially over the weekend, The viral tech blog creates large gaps on the CME chart.
On December 25, 2020, the US stock market closed for Christmas and reopened the following Monday, December 28. During that festive period, The viral tech blog the price of bitcoin skyrocketed from $ 23,795 to $ 26,353, creating a $ 2,740 gap in CME's bitcoin futures. graphics. So far, this gap has not been filled.
Why are these gaps so important? CME gaps, for no proven reason, act as magnets for price action and have a statistically high tendency to fill, meaning that the market price generally returns to its original point, The viral tech blog which in this case would be $ 23,795. . A study conducted in 2019 revealed that CME gaps cover more than 95% of the time.
While this suggests that prices could drop to $ 20,000, it's worth noting that there are three other gaps below on the bitcoin chart that has yet to be filled, including one at $ 9,665.
4. March is coming
March has consistently been the worst-performing month for bitcoin, with an average loss of 14.725% since 2017, The viral tech blog when the market began to gain traction. The second worst month, on average, in September, with an average loss of 9.05% during the same period.
While past performance does not guarantee future results, The viral tech blog history strongly suggests that there is seasonality in bitcoin market sentiment. This behavior could be attributed to the upcoming fiscal year April 15 in the US and merchants selling bitcoins to cover their tax bills.
