Bitcoin, the world's most dominant cryptocurrency, has shown remarkable resilience amid recent market volatility. After falling to its lowest level in more than four months, Bitcoin price rebounded sharply, climbing to a high of $56,856.61, up 6% from its previous low of $53,717.34.

The recovery has stoked investor optimism, and analysts are closely watching Bitcoin’s performance to gauge the likelihood of a new rally.

BTC Daily Chart Site: CoinMarketCap

Current market conditions reflect cautious optimism and strategic positioning of investors. Bitcoin experienced some volatility after reaching its daily high, but it managed to hold on to most of the gains it had generated over the past 24 hours.

This stabilization is a positive sign that the market has found support at these levels. As several analysts have noted, oversold conditions before the bounce suggest that the sell-off may have been overdone, setting the stage for a corrective upside move.

Institutional investor interest in Bitcoin remains strong, as evidenced by inflows into Bitcoin exchange-traded funds (ETFs). U.S. Bitcoin ETFs have seen net inflows of $438 million over the past two trading days.

This inflow of capital is crucial as it provides the liquidity needed to support Bitcoin’s price during periods of heightened volatility and selling pressure.

Bitcoin Price Prediction: The sell-off will eventually end

Bitcoin's recent rise and fall are influenced by a variety of factors. One important reason for the recent price drop is the announcement by the Mt. Gox trustee that it has begun paying certain creditors.

The development sparked concerns that Bitcoin could flood the market, which, combined with an already weak market, put downward pressure on prices.

Another key factor is the German government’s move to liquidate its massive Bitcoin holdings. Since mid-June, Germany has sold more than 10,000 BTC, causing the price of Bitcoin to fall by nearly 20%.

This massive sell-off added to the selling pressure in the market, further exacerbating the price decline. The market reacted strongly to these sales, and investors worried that other large shareholders might be further liquidated.

However, the recent rebound in Bitcoin price has prompted analysts to revisit their price predictions and technical analysis.

Oversold conditions and the subsequent rebound suggest that Bitcoin could be about to embark on a new rally. The relative strength index (RSI) and moving averages suggest a possible bullish trend in the short term.

The RSI, which measures the speed and variability of price movements, showed that Bitcoin was in oversold territory before its recent rally.

This oversold condition usually precedes a price pullback, indicating that a market recovery is imminent. The RSI moving back into neutral territory suggests that selling pressure has eased and buyers are stepping in to support prices.

Moving averages also support the bullish outlook. The 50-day moving average (MA) is approaching a crossover with the 200-day MA, known as a “golden cross,” which is considered a bullish signal.

Historically, a golden crossover has usually preceded a sharp rise in Bitcoin prices, indicating a shift in market momentum from bearish to bullish. If such a crossover occurs, it could attract more buyers and further support prices.

Another important metric is the Puell Multiple, which measures the profitability of Bitcoin miners. The Puell Multiple fell sharply during the bull cycles of 2016 and 2020, before Bitcoin prices began to rise sharply.

Currently, the S&P multiple suggests that we may be nearing the end of the correction phase, suggesting a bullish rebound in Q3 2024 is possible.

Moreover, market sentiment appears to be improving. The Fear & Greed Index, which measures the state of market sentiment, has shown signs of recovering from extreme fear levels.

Positive news such as Bitcoin ETF inflows and the return of assets to the German government helped boost market sentiment and reduce uncertainty.

The German government agency, the Federal Criminal Police Office (BKA), recently recovered over $200 million worth of Bitcoin from various exchanges, providing the agency with a much-needed confidence boost.

The influx of funds helped Bitcoin surpass $57,300 in early Asian trading, reflecting a 3.5% gain over the past 24 hours. Other major cryptocurrencies such as Solana (SOL), Ethereum (ETH), and Dogecoin (DOGE) also experienced significant gains.