Bitcoin price analysis: A series of on-chain and technical factors brought BTC below $55,000

Bitcoin’s (BTC) price dipped 10% in just six hours due to a combination of negative on-chain and technical factors. What’s next for Bitcoin, and should you consider buying some BTC at the moment?

Fundamental analysis: Overleveraged positions and lower institutional demand drive the price of BTC down

Bitcoin’s strong move past $60,000 and the creation of a new all-time high of $61,781 ended up in a sudden dip which brought its price below $55,000. While no particular reason for the dip can be singled out, we can point out to a number of factors that contributed to the sudden drop in Bitcoin’s price.

First off, while Bitcoin managed to pass the $60,000 mark for a brief period, it failed to establish a strong presence above it. Sideways trading and constant contesting of the $60,000 level essentially “invited” bears to join the playing field.

This, on top of the negative spread on the Coinbase exchange, when compared to Binance, may have indicated a lower institutional demand. As a comparison, previous crucial levels ($20,000, 30,000, 40,000, 50,000) had the spread heavily tilted to the positive side.

“The failure to establish a foothold above $60,000 and the decline is most likely the result of the flat-to-negative premium on Coinbase – a major bellwether for institutional demand,” – Ki Young Ju, CEO of blockchain analytics firm CryptoQuant. 

On top of that, the addresses holding $1,000 or more Bitcoin have started to take profits in recent days, causing further bearish sentiment.

Another major indicator that many analysts pointed to was the way BTC reached its new all-time high. According to Patrick Heusser, head of trading at the Crypto Finance AG, the latest pullback is completely healthy, as the breakout above $60,000 was driven by leveraged traders, which could be confirmed by the perpetual futures funding rate as well as the futures premium.

BTC posted week-over-week gains of 12.82%, outperforming ETH‘s 5.42% gain over the same period. Bitcoin is currently boasting a market value of 1,05 trillion, taking up 61.5% of the total crypto market cap.

At the time of writing, BTC is trading for $56,350, which represents a price increase of 4.23% when compared to the previous month’s value.

BTC/USD technical analysis: BTC finds strong support at the 38.2% Fib retracement

While Bitcoin’s recent moves towards the upside were seemingly strong and unshakeable, the new weekly candle opening brought strong bear sentiment to the market.

This caused BTC to quickly dip below the 21-period 4-hour EMA, and reach as low as $54,555. However, the largest cryptocurrency by market cap found support in the 38.2% Fib retracement level and pushed up above the 21-period 4-hour EMA.

BTC/USD 4-hour chart

Bitcoin’s RSI also took a dive, with its price swiftly falling below the middle of the value range. Its current value sits at 43.10.

BTC/USD 1-hour chart

Taking a look at the hourly time-frame, we can see how Bitcoin dipped early Monday. However, its price is slowly attempting to push back up as bear presence fades. BTC is currently trying to stabilize above the $56,350, with its next strong resistance being the 23.6% Fib retracement level of $57,350. On the other hand, its first strong support level sits at the 38.2% Fib retracement level of $54.615.

It’s important to note that most analysts think that, even though the latest price plunge was intense and sudden, this was a healthy pullback from an overleveraged position.

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