Bitcoin's current price sits at $37,765, showing consistent upward movement in the past two weeks.
However, a concerning sign called bearish divergence on the chart suggests a potential significant drop in Bitcoin's value.
Despite the rising prices, big investors (whales) are still holding onto their Bitcoin, indicating that a sell-off might not happen immediately. This gives Bitcoin some time before a possible crash.
Earlier this month, the excitement around the potential approval of spot Bitcoin ETFs boosted Bitcoin's value. However, when the Securities and Exchange Commission (SEC) delayed the approval, the positive momentum weakened. Despite this setback, Bitcoin still experienced some support from large investors, but signs now point to a likely reversal in this upward trend.
Analyzing the situation, while Bitcoin's price appears to be on a consistent rise, the Relative Strength Index (RSI) tells a different story. The RSI shows lower lows, creating what is known as bearish divergence. This indicates that the positive momentum supporting the price increase is diminishing.
As a result, the ongoing price surge may come to a halt, and Bitcoin could experience a correction to validate the bearish divergence. This correction could lead to a drop in Bitcoin's price, testing support levels at $36,833 and $33,901. There's a considerable risk of further decline to $31,507, and if that support is breached, Bitcoin might fall to a crucial psychological support level of $30,000. However, reaching this point could trigger renewed interest and investment, potentially pushing the price back up.
However, if the bullishness does not wane and investors attempt to pump the price again, BTC could rise further and invalidate the bearish thesis by charting a rise to $38,000 and beyond.
Bitcoin still has some time before a crash
The bearish divergence would be confirmed once the price falls, but the chances of that happening immediately are not very high. Looking at the Market Value to Realized Value (MVRV) ratio, one can note that, at the moment, the indicator is at 3.4%.
Since the indicator is used to assess the average profit/loss of investors who purchase an asset, the 30-day MVRV ratio measures the average profit/loss of investors who purchased an asset in the past month.
This means that investors who purchased BTC in the past month are sitting at 3.4% profit. This amount is not enough to induce profit booking, which would cause a sell-off at the hands of the investors.
Investors are likely to sell their holdings to realize profits when MVRV hits 6.7% to 16.8%. BTC has undergone major corrections when this happened; hence, this area is termed a danger zone.
Furthermore, the whale addresses holding 1,000 to 10,000 BTC are still accumulating, adding nearly 60,000 BTC in the past week. This $2.26 billion worth of purchase has brought their total holding to 4.73 million BTC.
Thus until the profits hit the saturation level and investors are convinced selling for profit is the better option, Bitcoin price has time. After that, a decline is inevitable.