Bitcoin’s price took a sharp 4% plunge following Friday’s release of weaker-than-expected US Nonfarm Payrolls (NFP) data. The jobs report, which showed slowing growth in employment, triggered a wave of sell-offs in both the stock and cryptocurrency markets. On September 6, the broader crypto market witnessed a dramatic decline, leading to approximately $300 million in liquidations. This has left investors wondering: Is Bitcoin’s correction done, and will it rally soon?
Why Is Bitcoin Price Correcting?
The disappointing NFP data is just the latest blow to the global financial markets. Combined with July’s concerning NFP report and the Bank of Japan’s surprise interest rate hike, the global economy has been facing increasing pressure. The stock market slump in the US, followed by market crashes across Asia and Europe, signaled rising fears of a recession. Indicators like the Sahm and Joshi Rule are flashing red, suggesting potential economic trouble ahead.
The cryptocurrency market hasn’t been immune to these concerns. Bitcoin’s price fell to $52,550 after the latest NFP data, dragging the broader crypto market with it. The question now remains: Is this price correction done, or will we see further declines?
Is the Bitcoin Price Crash Over?
Following Friday’s crash, Bitcoin saw a modest recovery, bouncing back nearly 4% and trading at $54,300. From a technical standpoint, there are three reasons why Bitcoin may have formed a potential bottom:
- Retest of the 50-Week Exponential Moving Average (EMA): Historically, the 50-week EMA has been a key support level for Bitcoin, especially during corrections in 2020 and 2021. A bounce from this level previously led to Bitcoin’s surge to its all-time high of $69,000. If this support holds, it could signal the start of a new rally.
- Bounce Off the Five-Month Support Trend Line: Bitcoin has consistently reversed off this trend line during the past six months of sideways price action. As long as this level remains intact, it provides a strong foundation for a potential recovery rally.
- Exaggerated Bullish Divergence in Momentum Indicators: Both the Relative Strength Index (RSI) and Awesome Oscillator (AO) show higher lows below their respective mean levels of 50 and 0. This suggests a decline in bearish momentum, and a move above these levels could indicate a bullish shift.
Whale Activity Signals a Potential Bottom
Another encouraging sign comes from Bitcoin’s on-chain metrics. Whale transactions—those worth $100,000 or more, and $1 million or more—have spiked after the price crash. This increase in whale activity suggests accumulation, which typically indicates the formation of a price bottom. Although whale transfers haven’t reached the highs seen in early August, the uptick in $1 million-plus transactions shows that large investors are entering the market.
Also Read: Bitcoin Braces For Potential 10% Drop Below $50K as Whales Sell Off $21B In BTC
While the technical indicators and on-chain metrics point to a potential recovery, investors should wait for confirmation on lower timeframes before making any big moves. A clear break above key resistance levels, combined with continued whale accumulation, could solidify the case for a bullish reversal.
In conclusion, while Bitcoin’s recent correction may have rattled investors, the signs of a potential bottom are growing stronger. The combination of support at the 50-week EMA, the five-month trend line, and increased whale activity suggests that Bitcoin’s price correction may be nearing its end. However, as always, caution is advised in this volatile market.
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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