Last week, expectations were high that Bitcoin would rise above $48K and stabilize near $50K by the weekend. Contrary to these predictions, Bitcoin faced a significant correction, dropping towards $41K, even after the SEC’s approval of a spot BTC ETF. Despite this setback, Bitcoin has somewhat recovered, currently testing the $43K level. Analysts now suggest that further decline might occur this week, with $38K being a critical point for a potential robust recovery.
Bitcoin’s Short-Term Sentiment Is Overheated
Holders of long positions are increasingly liquidating as the BTC price consistently faces rejection above $43,500. Consequently, Bitcoin experienced over $11 million in liquidations, with nearly $8 million in bullish positions being liquidated, according to Coinglass data.
On-chain data shows the Bitcoin market cooling down after overheating near $46K, with net unrealized profit moving from the denial to the optimism zone at 47.6%. This indicates most short-term holders sold off between $43K-$49K, leaving long-term holders to support the BTC price.
The MVRV ratio has decreased from 1.69 to 1.38, suggesting the market value is heading toward Bitcoin’s realized value. A further decline in BTC price might be expected as the MVRV ratio has not yet stabilized.
Additionally, Bitcoin’s AASI (Active Address Sentiment Indicator) was already overheated as the orange line was hovering near the red line. The AASI is developed by comparing Bitcoin’s 28-day price change percentage (orange line) with its 28-day change in active addresses. This indicator gives a short-term sentiment of the market.
When its orange line hits the upper boundary, marked by a red dotted line, it signals an overheated short-term market sentiment. This overheating occurs because the pace of price increase surpasses the growth rate of active addresses. However, the orange line needs to dip toward the green line to initiate further accumulation by buyers near the dip, potentially plunging BTC price toward $38K.
What’s Next For BTC Price?
Bitcoin has shown significant volatility recently, as it faced multiple rejections between $42,500-$43,500, indicating buying at lower levels and selling during rallies. As of writing, BTC price trades at $42,930, declining by over 0.57% from yesterday’s rate.
Bears are currently aiming to send the price below the ascending support line, suggesting market rejection at higher levels. If the price declines below $40K, the next focus for the bulls will be to halt the decline at $38K level.
A rebound from the $38K level is expected as it might lead the bulls to attempt pushing the price above the crucial resistance at $44,700 quickly. Achieving this could see the BTC price gaining its momentum and this might trigger a new bullish trend next week. In such a scenario, BTC price is expected to fully capitalize and aim for a surge toward $48K.
Conversely, if the price falls below the $38K, it could trigger more selling, potentially driving the price down to $35K-$36K.
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