Continuous Bitcoin Price Decline: Necessary for a Healthy Correction

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Bitcoin kicked off the new week with a significant sell-off. The price of Bitcoin dropped by 5% in the past 24 hours, reaching around $41,000 at the current moment. Despite the sharp price correction, technical indicators and on-chain data suggest that Bitcoin still exhibits strength and is likely to reclaim the $44,000 level in the near future.

On-chain Analytics

Data from Lookintobitcoin highlighted the exhaustion of the bullish camp. According to the December 2023 report, Bitcoin’s price had achieved short-term targets based on the gold ratio, marked by the Crosby Ratio. This indicates that Bitcoin’s short-term price is “over-extended,” prompting the need for a correction or, at the very least, a slowdown.

The gold ratio multiplier is an indicator exploring the acceptance curve and market cycle of Bitcoin, providing insights into how the price may behave in medium and long-term timeframes.

In other words, Bitcoin’s price reached overbought conditions above $40,000, as buyers began to run out. The Relative Strength Index (RSI) indicates that the price has been overbought since December 5.

These initial signs suggest that the last buying pressure may diminish as traders realize that the upward momentum has waned, and there is a possibility of profit-taking.

Bitcoin Has Been Trapped

The ongoing correction in the Bitcoin market is attributed to the resistance posed by the formidable barrier around the $44,000 zone. The Lookintobitcoin gold ratio multiplier indicator, exploring the acceptance curve and market cycle of Bitcoin, reveals that the target multiplier of 1.6 has currently been reached around the $44,000 region. It is noteworthy that Bitcoin has been trapped here for the past week, unable to convincingly break above it.

In other words, the Bitcoin price is grappling with staunch rejection from this supply congestion zone, making it a challenging hurdle for bullish momentum to overcome.

The toughness of the barrier at $44,000 is emphasized by on-chain data from the IntoTheBlock’s In/Out of the Money Around Price (IOMAP) model. According to the IOMAP chart, this level falls within the price range of $43,346 to $44,627, where approximately 585.77 BTC was previously bought by around 1.43 million addresses.

Any efforts to push the price above this level will encounter strong selling pressure from this group of sellers, who may be looking to break even.

However, the ongoing correction may be a price retracement, considering it as a healthy adjustment within a broadly established upward trend over the past few months.

Data from Santiment indicates an increasing outflow of funds from Bitcoin exchanges. According to the chart, the BTC exchange balance is currently at -347. The negative figure suggests that the outflow of BTC outweighs the inflow, indicating that investors tend to hold rather than sell, which is a bullish signal.

This suggests that the recent drop to $40,000 may be a short-term correction, providing traders with an opportunity to buy more as prices decline before resuming the upward trend.

Technical Analytics

From a technical perspective, the Bitcoin price is trading above all major moving averages, maintaining their upward trajectories. The converging Moving Average Convergence Divergence (MACD) indicator is still moving above the neutral line in the positive territory. The MACD line (blue) remains above the signal line (orange) after crossing above it on October 16, indicating that market conditions still support the upward trend.

Therefore, the Bitcoin price may continue to rise from the current level as buyers aim to break above $44,000. A clear breakthrough at this level could see Bitcoin surpassing the psychological $50,000 mark in the New Year, especially as the SEC is expected to make a decision on a Bitcoin ETF in January 2024, coinciding with the next Bitcoin Halving event.