Investors in Bitcoin have been facing challenges lately as the leading cryptocurrency continues to see a decline in its value. Recent analysis has suggested a further drop in price in the upcoming weeks.
Lets examine the current situation with Bitcoin in more detail.
Potential Drop to $31,000 for Bitcoin
According to data from CoinMarketCap, Bitcoin experienced a decrease of around 7% in its price last week. The past 24 hours also saw a slight downturn in BTC’s value.
At the time of this writing, Bitcoin was trading at $54,306.75 with a market cap exceeding $1 trillion.
An analysis of IntoTheBlock’s data revealed that following the recent price adjustment, more than 41 million Bitcoin addresses were in profit, making up 77% of all Bitcoin addresses.
Meanwhile, a well-known crypto analyst named Ali, shared a tweet highlighting a significant observation. The tweet discussed the correlation between Bitcoin’s price and its realized price-to-liveliness ratio.
Historically, when Bitcoin’s price falls below the realized price-to-liveliness ratio, it often leads to further price declines.
Specifically, a drop below this metric typically signals a decline in BTC’s value towards the realized price. Similar situations occurred in 2019, 2020, and 2022.
Currently, such a bearish crossover has occurred, indicating a potential drop in Bitcoin’s value back to its realized price, currently standing at $31,500.
Likelihood of Continued Bearish Trend for BTC
Given the possibility of a price drop based on historical patterns, CryptoCrypto examined other data sets to gauge the likelihood of a corrective move.
It was noted that Bitcoin’s investor capitalization has significantly increased. In the past, when the investor capitalization surpasses the price of BTC, it has often preceded downward price movements.
Further analysis of CryptoQuant’s data indicated concerns in the derivatives market, as Bitcoin’s funding rate decreased. The taker buy sell ratio for the coin turned negative, reflecting a prevailing selling sentiment in the futures market.
Despite this, there was a notable increase in Bitcoin purchases by investors, evident from the declining exchange reserves and lower net deposits on exchanges compared to the weekly average.
Based on the analysis, Bitcoin was testing a crucial support level. A breach of this level would increase the likelihood of Bitcoin following historical trends and heading towards $31,000.
The Chaikin Money Flow (CMF) signaled a decline, hinting at a potential failure in testing Bitcoin’s support. However, the Relative Strength Index (RSI) remained positive as it trended upwards.