Recently, Bitcoin [BTC] dominance soared to an impressive 57%, marking a significant daily increase of more than 5% that lifted BTC above $66K – a level it hadn’t reached in over 150 days.
Currently priced at $67,350, Bitcoin has surged more than 10% in just a week. This swift climb has raised concerns among analysts at CryptoCrypto, prompting discussions on whether the market is approaching a state of overextension.
If such a scenario unfolds, a pullback to a local low might be on the horizon before Bitcoin makes an attempt to retest its all-time high.
Heightened bitcoin dominance indicates overheating
Over the past week, daily gains surpassing 2% have enabled Bitcoin to recover from its decline to $60K, solidifying that level as a newfound support.
Moreover, this upsurge was bolstered by an increasing RSI, signaling robust momentum. Trade volume also surged to a fresh local peak, indicating growing backing from retail investors.
Consequently, Bitcoin’s dominance also reached a new high. Nevertheless, this bullish trend has propelled BTC into a phase of “greed,” hinting at potential overheating in the market.
Typically, a shift towards greed often aligns with the point in a cycle where Bitcoin reaches a market peak, frequently resulting in a subsequent price drop.
During this period, numerous traders cash out, seeking to amplify their profits, while new buyers are cautious, anticipating an inevitable correction.
Therefore, these traders typically await an opportunity to buy the dip, leveraging the market bottom once Bitcoin’s dominance resurges.
With Bitcoin’s dominance currently at a record high and other indicators signaling a potential market peak, Bitcoin could be poised for a correction.
This potential correction might shake off weaker investors, paving the way for new buyers to capitalize on a probable decline.
Bitcoin’s Potential Retracement to a Local Low
Previously, Bitcoin encountered resistance at $64K, a level that must transform into support to signal a potential dip. This scenario materializes when fresh interest views this price range as an appealing entry point.
As Bitcoin becomes more susceptible to speculative fluctuations, the likelihood of an increase in short positions in futures trading grows, with traders eyeing $64K as the next dip opportunity.
This situation further emphasizes the prospect of Bitcoin awaiting a correction before endeavoring to challenge its all-time high.
Moreover, a notable analyst has also warned investors about the escalating volatility trend, influenced by the uptick in Bitcoin dominance.
Currently, the price fluctuates between $68.4K and $66.7K, while Open Interest on major exchanges has surged to $20.3B, rendering Bitcoin even more exposed to sudden price fluctuations.
Overall, the elevated Bitcoin dominance signals a potential market overextension, supported by various factors. The rapid surge to $67K has propelled the market into a phase of greed, indicating that the current price level could represent a market peak.
While the analysis from CryptoCrypto proposes $64K as the next destination for a potential local low, this marks a promising opportunity for dip-buying.