Bitcoin Price Faces Potential 20-25% Correction Amidst Rising Risks
Bitcoin’s price is likely to face a 20-25% correction due to a downturn in global M2 money supply, with historical patterns showing a correlation with the Profit/Loss ratio suggesting an overheated market. Despite a significant rise in active Bitcoin addresses indicating increased adoption, the risk of downward pressure remains, particularly with key support levels around $85,000.
Bitcoin (BTC) appears poised for a potential correction, with predictions indicating a price drop of 20% to 25% due to its close correlation with the global M2 money supply. Recent trends show that as global liquidity decreases, Bitcoin’s price is expected to follow suit approximately 70 days later. This correlation indicates that the downward trajectory of M2 might adversely affect Bitcoin’s valuation, warranting caution among investors. Furthermore, data indicates that the Bitcoin Realized Profit/Loss ratio is at historical highs, suggesting an overheated market where many investors are cashing out their profits. This behavior often signifies a market peak, as evidenced by historical patterns where spikes in the P/L ratio are typically followed by sharp declines in Bitcoin’s price. However, despite these risk factors, there is a significant increase in the number of active Bitcoin addresses, which hit an 11-month high, indicating rising interest and engagement in Bitcoin as a transactional currency. Overall, while there are bullish indicators in terms of increasing active users, the risk of a price correction remains substantial, with critical support levels at $85,000 and $86,500, if the price continues to decline.
The article discusses the relationship between Bitcoin’s price and the global M2 money supply, highlighting a significant correlation that may influence Bitcoin’s price movement. The focus on macroeconomic factors such as liquidities, interest rates, and the P/L ratio underscores the delicate interplay between market fundamentals and Bitcoin’s valuation. Additionally, the increase in active addresses is presented as a contrary indicator of market sentiment, suggesting growing adoption amidst potential correction risks. The analysis outlines these dynamics while examining critical price support levels and the implications of recent volatility.
In conclusion, Bitcoin’s price is at risk of a potential 20% to 25% correction, influenced by declining global M2 money supply and an overheating market as reflected by high realized Profit/Loss ratios. Despite the rise in daily active addresses signifying growing enthusiasm for Bitcoin, the established price support zones at $85,000 and $86,500 will be crucial in determining Bitcoin’s trajectory in the coming weeks. Investors are advised to exercise caution amidst these mixed signals of market strength and potential downturns.
Original Source: www.thecoinrepublic.com
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