Bitcoin (BTC) reached a new all-time high (ATH) of $89,900 on Tuesday before settling near $86,000, riding a 30% surge since November 5. However, technical indicators and on-chain data hint at an imminent corrective pullback, as profit-taking and high leverage signal a possible price correction for the cryptocurrency.
Market Euphoria Meets Overleveraged Conditions
The recent BTC rally has been fueled by high market optimism, with data from Santiment revealing a surge in profit-taking among holders. Some traders are capitalizing on Bitcoin’s high price, which may indicate that the rally has reached an overextended level. While BTC’s climb has driven euphoric sentiment, it is not as intense as past peaks, such as in March when Bitcoin hit previous highs.
On the technical front, funding rates on exchanges like Binance and Bitmex suggest aggressive leveraging, as traders take on higher margins to capitalize on potential gains. According to QCP Capital, perpetual funding rates are elevated, and basis yields have reached a seven-month high. “With BTC’s break of key resistance and its multi-month range, the market is in a state of euphoria,” QCP Capital noted, yet they warned of pullback risks from potential leveraged washouts. Historically, such elevated levels in basis yields tend to be short-lived, reinforcing the notion that a correction may be around the corner.
Institutional Inflows Boost Bullish Sentiment
Despite indications of a possible correction, institutional interest remains strong, with big investors accumulating Bitcoin amid profit-taking by retail holders. Data from Coinglass highlights a substantial $1.12 billion inflow into U.S. spot Bitcoin ETFs on Monday, driven largely by BlackRock’s IBIT fund, which accounted for $763.6 million of the total. The influx of institutional capital could provide a counterbalance to retail profit-taking, supporting the potential for continued price appreciation if inflows outpace retail sales.
As long as whales keep buying, BTC may remain resilient, despite minor dips spurred by retail selling. This pattern underscores the market’s current dynamic: while individual holders seek quick profits, institutional players are showing signs of long-term accumulation, suggesting sustained confidence in Bitcoin’s prospects.
Bitcoin’s Price Forecast – Indicators Point to a Healthy Pullback
Technical analysis highlights signs of a potential corrective phase for Bitcoin. The Relative Strength Index (RSI) currently stands at 76, above the overbought threshold of 70, indicating that BTC may face downward pressure. As RSI begins to point downwards, traders should exercise caution in adding to their long positions, as a dip below the overbought range could trigger a pullback.
If Bitcoin experiences a correction, it could retrace 8.5% from its present level, targeting support at $78,807. However, should bullish momentum persist, the price might test its next Fibonacci extension level of $99,887, a target drawn from July’s high of $70,079 to August’s low of $49,000.
While current leverage levels hint at high volatility risks, market fundamentals remain solid, suggesting that any near-term pullback would likely be a healthy move. Corrections could offer buying opportunities as the market recalibrates leverage. As long as structural indicators remain favorable, Bitcoin’s longer-term bullish outlook may endure even through short-term adjustments.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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