Bitcoin Declines by 15%: What Does it Mean for the Market?
In a recent turn of events, Bitcoin has experienced a significant decline of around 15% over the past week. This downward trend comes after the cryptocurrency reached its record high of approximately $108,365. According to data from Bitstamp, the market capitalization of Bitcoin has been steadily increasing since the beginning of the year.
Tether Dominance Signals ‘huge dump’ in Bitcoin Markets
But what’s behind this sudden decline? One possible explanation lies in the sharply recovering Tether (USDT) dominance index. The USDT Dominance Index, or USDT.D, measures Tether’s share in the overall cryptocurrency market. As seen in the chart below, the USDT.D metric has rebounded significantly from its support levels last seen in March.
Tether vs Bitcoin: A Tale of Two Markets
The ForexX Mindset, a contributor to TradingView, has noted that the Bitcoin price may witness a ‘huge dump’ due to its negative correlation with the USDT Dominance Index. This means that as Tether’s market dominance increases, the value of Bitcoin tends to decrease.
Negative Correlation Between Tether and Bitcoin
According to The ForexX Mindset, when Tether’s dominance index rises, it signals a flight to safety among traders. In this scenario, investors tend to shift their capital into Tether, anticipating increased market volatility or downside pressure in the cryptocurrency market.
Ignoring Short-Term Gains: A Warning from The ForexX Mindset
The analyst warns that Bitcoin traders should be cautious of short-term price gains and ignore them at all costs. ‘We’ll probably see a sharp spike in price – that’s the pump – which might fool people into thinking the market is about to take off,’ The ForexX Mindset says.
The Bearish Outlook: What Lies Ahead for Bitcoin?
However, this brief recovery may only be a trap set by institutional players. As seen in the chart below, Bitcoin staged a modest recovery from its December low of around $92,120. But instead of continuing its upward momentum, the price has started to decline.
The Modest Recovery: A Trap for Retail Traders?
According to The ForexX Mindset, this brief recovery may be nothing more than an institutional ambush. Dark pools and whales may deliberately pump Bitcoin prices to attract retail traders, only to offload their holdings at local highs, leaving smaller investors to shoulder considerable losses.
Technical Analysis: What Does the Chart Say?
The chart below shows Bitcoin’s price movement over the past few weeks. As can be seen, the cryptocurrency has failed to break above the 1.618 Fibonacci extension level near $102,734. This has led to a correction in the market, with Bitcoin experiencing a pullback.
Weekly Relative Strength Index (RSI) Enters Overbought Territory
The weekly RSI has entered overbought territory while showing bearish divergence with respect to its prices forming higher highs. This classic signal of waning bullish momentum indicates that a correction is underway in the market.
What Lies Ahead for Bitcoin?
Currently trading near $96,000, Bitcoin’s next downside target could be the 20-week exponential moving average (EMA) around $81,500 if the correction deepens. A further decline could see Bitcoin retesting the 50-week EMA near $67,700, which aligns with the 1.0 Fibonacci retracement level.
A Potential Rally: What’s the Forecast?
However, claiming the 1.618 Fib line as support could enable a Bitcoin price rally toward $150,000 by the first half of 2025. This prediction was earlier made by multiple analysts and is based on technical analysis of market trends.
The Risks Involved in Investing in Cryptocurrencies
As with any investment or trading move, there are risks involved. Every investor should conduct their own research before making a decision. Market trends can be unpredictable, and investing in cryptocurrencies carries inherent risks. This article does not contain investment advice or recommendations.
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