Bitcoin (BTC) experienced a 5% decline on the daily chart, falling below $93,000 after reaching a high of $99,600 on Nov. 22. This marks the first significant pullback since August, as overbought market conditions and excessive leverage contributed to the downturn.
Bearish Divergence and Profit-Taking Signal Correction
Overbought Indicators:
Bitcoin’s (BTC) price drop followed a strong bearish divergence between its price and the Relative Strength Index (RSI) on the daily chart, signaling an overbought market. This divergence hindered (BTC) from breaching the psychological $100,000 threshold.
Profit-Taking Behavior:
Data from CryptoQuant revealed that Bitcoin’s Profit and Loss (P/L) ratio reached levels comparable to its March 2024 peak, when BTC hit $73,400. Historically, such high P/L ratios near market tops indicate profit-taking by long-term holders. This activity often leads to capital rotation, where selling pressure is absorbed by new retail investors during bull markets.
Overleveraged Markets Tip the Scale
Futures Market Dynamics:
The correction was exacerbated by rising funding rates, indicating overleveraged positions in the futures market. According to data analytics platform IntoTheBlock, funding rates reached unsustainable levels before normalizing, which triggered a shift in momentum toward bears.
Volume Patterns Suggest Sideways Action:
Crypto futures analyst Byzantine General noted that current BTC price behaviour mirrors previous local tops, where prolonged sideways consolidation often follows. This suggests that Bitcoin could enter a period of range-bound trading under $95,000.
Key Support Levels and Technical Outlook
Potential Liquidity Zones:
Bitcoin’s (BTC) rise from $73,000 to nearly $100,000 occurred without significant price inefficiencies, creating liquidity zones around the $90,000 and $85,000 levels. These zones are likely targets for BTC traders in the short term.
RSI Drops Below 50:
The RSI dropping below 50 for the first time since Nov. 6 indicates bearish momentum, with sellers expected to dominate price action. A daily close above $95,000 would confirm bullish sentiment, but this scenario appears unlikely in the current environment.
Outlook: Consolidation or Further Decline?
Bitcoin’s (BTC) retracement highlights the risks of overleveraged markets and profit-taking near record highs. While this correction may pave the way for healthier price action, traders should monitor the $90,000 support level closely.
Immediate Bullish Trigger:
A daily close above $95,000 could restore confidence in the short term, while a deeper correction to $85,000 remains a possibility if sellers continue to dominate, according to Cointelegraph.
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