Just two days ago, Bitcoin [BTC] took the lead with an impressive 57% dominance after a striking 5% daily increase that propelled BTC above the $66,000 threshold – a level not reached in over 150 days.
Currently priced at $67,350, Bitcoin has witnessed a remarkable surge of over 10% in the span of a single week. This swift climb has prompted analysts at CryptoCrypto to ponder on whether the market is approaching an overextended phase.
If such is the case, a potential retreat to a local low might materialize before Bitcoin makes another attempt at retesting its all-time high.
Heightened Bitcoin Dominance Indicates Overheating
Over the past week, daily gains surpassing 2% have aided Bitcoin in bouncing back from its $60,000 decline, solidifying this level as a newfound support.
Furthermore, this surge was corroborated by an escalating RSI, signaling robust momentum. The surge in trade volume to a fresh local peak also denotes increased backing from retail investors.
Consequently, Bitcoin dominance has also scaled new heights. However, this bullish momentum has propelled BTC into the realms of “greed,” hinting at potential indicators of market overheating.
Traditionally, a transition to greed often aligns with the point in a cycle where Bitcoin reaches a market peak, often paving the way for a subsequent price plummet.
During this phase, numerous traders opt to exit, aiming to double their profits, while new buyers exhibit hesitation, anticipating the inevitable correction.
Thus, these traders typically await an opportunity to buy the dip, seizing the moment when Bitcoin dominance once more ascends.
Presently, with Bitcoin dominance at an all-time high and other signals pointing towards a market peak, Bitcoin could be poised for a correction.
This potential correction might weed out weaker positions, enabling fresh buyers to capitalize on a prospective dip.
Possible Retracement for Bitcoin towards a Local Low
Previously, Bitcoin encountered resistance at $64,000, a level that must transition into support to indicate a likely dip. In this scenario, fresh interest views this price range as an appealing entry point.
Moreover, as Bitcoin becomes increasingly susceptible to speculative fluctuations, the probability of heightened short positions in futures trading escalates, with traders eyeing $64,000 as the subsequent dip.
This circumstance lends further credence to the notion that Bitcoin might be awaiting a correction before striving to challenge its all-time high.
Additionally, a respected analyst has advised investors on the prevailing volatility trending towards negativity, influenced by the surge in Bitcoin dominance.
Presently, the price oscillates between $68,400 and $66,700, with Open Interest on leading exchanges climbing to $20.3 billion, rendering Bitcoin even more prone to sudden price oscillations.
Overall, the elevated Bitcoin dominance flags an overextended market, supported by additional variables. The rapid surge to $67,000 has pushed the market into a state of greed, hinting that the current price level signifies a market peak.
While analyses from CryptoCrypto propose $64,000 as the next objective for a potential local low, this presents an optimal opportunity for buying the dip.