Bitcoin’s surge to $65,497 has surprised many, especially since September was initially expected to be a bearish month. However, new on-chain metrics suggest that the recent price increase might not hold for long. According to the Daily Active Addresses (DAA) divergence, Bitcoin may be heading for a short-term correction before making another attempt to hit $70,000.
What Is The DAA Divergence?
The DAA metric is a key indicator that tracks user engagement with a cryptocurrency. It compares Bitcoin’s price to the number of active addresses interacting with the coin. If both the price and active addresses rise in tandem, it’s typically seen as a bullish sign, signaling that market participants are confident in further gains.
Currently, though, the DAA divergence for Bitcoin has plunged to -54.89%. This sharp decline indicates that fewer market participants are actively engaging with BTC, even as its price climbs. Such a divergence is considered a sell signal, suggesting that the current rally may be running out of steam.
Profit-Taking on the Horizon?
In addition to the DAA data, another critical on-chain metric is the Historical In/Out of Money (HIOM), which measures the percentage of Bitcoin addresses that are profitable. As of September 16, 79.92% of Bitcoin holders were “in the money,” meaning they were making a profit at that price level. However, in recent days, that number has surged to 91.97%.
Historically, when the HIOM ratio exceeds 90%, a wave of profit-taking typically follows, leading to a decline in Bitcoin’s price. A similar pattern was observed in July when 93% of holders were in profit—shortly after, Bitcoin’s price dropped, with the percentage of profitable holders falling to 78%. A similar event occurred on August 25 when the ratio was 88.35%, followed by a price decline to 76.23%.
If history repeats itself, Bitcoin could be in for another short-term correction, as holders may take profits, leading to a temporary pullback in price.
From a technical standpoint, Bitcoin’s price has hit a major resistance level near $69,000. While the price is still projected to produce a positive return in the long term, the daily chart suggests that bears are gaining strength. If Bitcoin drops below $65,000, the key resistance zone at $65,838 could become a crucial battleground.
Should the price break below this level, Bitcoin could fall to as low as $60,348 in the coming days. On the flip side, if Bitcoin manages to close above $65,838, the bulls could regain control, pushing the price back up to $68,236 or higher.
Also Read: Bitcoin (BTC) Breaks $65,000 as China Stimulus and Stablecoin Inflows Fuel Rally
Short-Term Pullback or Long-Term Rally?
While Bitcoin’s recent rise has been promising, the current on-chain metrics suggest that a short-term pullback might be imminent. With the DAA divergence flashing a sell signal and the HIOM ratio signaling potential profit-taking, investors should brace for some volatility in the coming days. However, if Bitcoin can hold key support levels, a new rally could be on the horizon.
As always, investors should keep a close eye on these key indicators and be prepared for both short-term dips and long-term gains.
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.