Bitcoin (BTC) could dip 30% to flush out โoverheatedโ conditions on one of its most reliable indicators.
In an analysis on X (formerly Twitter) on Jan. 1, popular commentator CryptoCon argued that a $30,000 BTC price was not yet a thing of the past.
Bitcoin DMI enters โoverheatedโ zone
Bitcoin may have approached $45,000 this week, but historical patterns call for a retracement to characterize the start of 2024.
Flagged by CryptoCon, the directional movement index (DMI) has reached levels that traditionally accompany a bearish trend reversal.
โI have been bullish on Bitcoin for all of 2023, but data shows us itโs time for a cooldown to start off the New Year, 2024,โ he commented.
โItโs a battle between reliable long-term data and those who think that this time will be different. I know which side Iโm on!โ
An accompanying chart showed current DMI readings echoing those of mid-2019 โ the point at which BTC/USD put in its mid-cycle top for its past price cycle.
At the time, the pair went on to dip by more than half over the following 16 months โ losses exacerbated by the March 2020 COVID-19 cross-market crash. While this time around may not be as bad, CryptoCon offered a ballpark figure of 30%, which would fall in line with historic pullbacks, as shown in the chart above from on-chain analytics firm Glassnode.
โA 30% correction from the DMI overheat zone brings us to prices around 30k. And that percentage is much less than in previous examples!โ he continued.
โThe data structure looks just like the example in 2019 with the double peak in red. But I think the drawdown will be far less than 50%, and not take near as long as then.โ
Even though most #Bitcoin data is overheated and topped out, price has decided not to cool down just yet for the New Year.
โ CryptoCon (@CryptoCon_) January 2, 2024
45k has been broken to the upside!
So long as it sticks, this may call for a fulfillment of all data like the MVRV-Z that hasn't quite reached its mark yetโฆ pic.twitter.com/kPQfdI6SAX
On Jan. 2, an update acknowledged that Bitcoin might be able to effect more upside before the correction takes hold โ possibly reaching $48,000, a popular target amid excitement over the imminent decision on the United Statesโ first spot Bitcoin exchange-traded fund, or ETF.
Funding rates split opinion
As Cointelegraph reported, overnight gains began to cool prior to the yearโs first Wall Street open.
Related: Countdown to US spot ETF: 5 things to know in Bitcoin this week
At the time of writing, BTC/USD traded around $45,000, per data from Cointelegraph Markets Pro and TradingView, while market data continued to flash its own warnings to bulls.
These came in the form of some of the highest funding rates seen in more than a year โ suggesting that traders may be too complacent in believing that higher prices are guaranteed.
#Crypto Funding rates have come down slightly compared to last week but still relatively high.
โ Daan Crypto Trades (@DaanCrypto) January 1, 2024
Let's see how this evolves this week as all the markets get back up to steam for the new year. pic.twitter.com/G02YKUq9YI
Not all market participants were concerned. Over the weekend, the popular commentator and trader known as Horse noted that, versus last cycle, funding remained within reasonable boundaries.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
