Bitcoin Faces Rejection at Key Level, Potential Correction Ahead
- Bitcoin’s price is facing rejection around the key level of $106,406, suggesting a potential correction.
- On-chain data reveals that BTC profit-taking activity reached record levels, signaling increasing selling pressure.
- Institutional players and leveraged ETFs’ CME exposure has increased modestly but remains below previous peaks.
Bitcoin (BTC) is experiencing a setback, trading below $106,000. On-chain data indicates weakness and a possible correction, with profit-taking reaching unprecedented levels. Institutional and leveraged ETF exposure on the Chicago Mercantile Exchange (CME) has seen a slight increase but remains below previous highs, reflecting a cautious market sentiment.
Bitcoin Profit-Taking and Inactive Wallet Activity Surge
Santiment’s Network Realized Profit/Loss (NPL) metric shows that BTC holders are securing profits around the $106,000 mark.
The NPL experienced a significant surge, marking the largest profit-taking event to date. This increase suggests that holders are selling their portfolios at a substantial profit, intensifying selling pressure.
Examining Santiment’s Age Consumed index also reveals bearish signals. Spikes in this index indicate that dormant tokens are being moved, often signaling short-term local highs or lows. Historically, such spikes have been followed by a decline in Bitcoin’s price as holders transfer tokens from wallets to exchanges, increasing selling pressure.
The recent surge was the highest since mid-May 2024, suggesting that BTC is poised for a downward trend.
CME Exposure Reflects Market Cautiousness
A report from K33 Research highlights that Bitcoin exposure on the CME by direct participants and leveraged ETFs has increased modestly but remains well below previous peaks, reflecting widespread market caution despite Bitcoin’s recent strength.
VolatilityShares 2x leveraged BTC ETF has a combined BTC exposure of 54,025 BTC, an increase of 10,620 BTC from its April 8 lows of 43,405 BTC, but still below the 23,485 BTC from its all-time high on December 17. Direct market participants’ exposure also follows a similar pattern.
According to a K33 analyst, “The lack of inflows into these instruments softens the flow effect on premiums and, therefore, reduces the attractiveness for direct participants to engage in basis trading.”
This relatively low exposure from CME traders indicates a cooler, more cautious market sentiment.
The report further explains that there is greater relative activity in offshore perpetual contracts compared to these CME cohorts. The nominal Open Interest (OI) in BTC perpetual contracts has surged to levels not seen since November and December.
“This growth in OI has occurred during a highly ambiguous funding rate regime,” says the K33 analyst.
The analyst continued, “While there is vibrant demand to add leveraged exposure in the market, there is no clear one-way trend that can be read into this activity. In essence, this creates a structure that increases liquidation risks in either direction, setting the stage for accelerated volatility ahead.”
Bitcoin Price Forecast: BTC Rejects and Falls Below $106,400 Resistance
Bitcoin’s price declined and closed below its daily level of $106,406. It recovered slightly over the weekend and on Monday but faced resistance again around the $106,406 level. Currently, it hovers around $105,400.
If BTC fails to close above the $106,406 resistance and continues its correction, it could extend the decline to retest its next key support level at $100,000, a psychological level.
The Relative Strength Index (RSI) on the daily chart is at 53 and trending downward towards its neutral level of 50, indicating fading bullish momentum. A drop below 50 would suggest increased bearish momentum and a further price decline. Additionally, the Moving Average Convergence Divergence (MACD) indicator showed a bearish crossover, with a growing red histogram bar below its neutral level, suggesting a continuation of the downtrend.
On the other hand, if BTC recovers and closes above $106,406, it could extend the rally towards its all-time high of $111,980.
Bitcoin, Altcoins, and Stablecoins: FAQs
What is Bitcoin?
Bitcoin is the largest cryptocurrency by market capitalization, a virtual currency designed to serve as money. This form of payment cannot be controlled by any single person, group, or entity, eliminating the need for third-party involvement during financial transactions.
What are Altcoins?
Altcoins are any cryptocurrencies other than Bitcoin. Some consider Ethereum not to be an altcoin because it is from these two cryptocurrencies that forks are produced. If this is true, then Litecoin is the first altcoin, forked from the Bitcoin protocol and, therefore, an “improved” version of it.
What are Stablecoins?
Stablecoins are cryptocurrencies designed to maintain a stable price, with their value backed by a reserve of the asset they represent. To achieve this, the value of any stablecoin is linked to a commodity or financial instrument, such as the U.S. Dollar (USD), and its supply is regulated by an algorithm or demand. The main objective of stablecoins is to provide an on-ramp and off-ramp for investors who wish to trade and invest in cryptocurrencies. Stablecoins also allow investors to store value, as cryptocurrencies, in general, are subject to volatility.
What is Bitcoin Dominance?
Bitcoin dominance is the ratio between Bitcoin’s market capitalization and the total market capitalization of all cryptocurrencies combined. It provides a clear picture of the interest in Bitcoin among investors. High BTC dominance typically occurs before and during a bull run, where investors turn to investing in relatively stable and high market capitalization cryptocurrencies like Bitcoin. A drop in BTC dominance usually means that investors are moving their capital and/or profits to altcoins in search of higher returns, often triggering an explosion of gains in altcoins.
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