As claimed by the researchers at Santiment, Bitcoin has been in an “overbought territory.” Hardly two hours after the report came out, BTC fell 4% in two hours.
Perhaps due to the possibility around the U.S. election on November 4, the cryptocurrency market saw an abrupt pullback. As Bitcoin dipped from $13,750 to $13,200, Ethereum and other major cryptocurrencies also dived.
Bitcoin at risk of a short-term correction, but it’s not all negative
Bitcoin is manifesting signs of a short-term price drop for the first time following its rally in September. The daily candle of BTC fell below the 10-day moving average, which has not occurred since early October.
But as analysts at Santiment noted, the rally of Bitcoin was suddenly growing congested. It increased by 33% in just 23 days, as the market began to exhibit indications of concern of missing out (FOMO).
As before-mentioned, a decent-size pullback at a notable resistance level at $14,000 is positive for the sustainability of the rally. Santiment mentioned tweeted:
“The new MVRV Divergence Model from Santiment indicates that #Bitcoin is in overbought territory, according to profits by average traders over various timeframes. Particularly in the past 6 months time range, average $BTC traders are +114.7% in profit.”
A near-term corrective stage was always likely because of the vast majority of the market being in profit.
The MVRV Divergence Model shows Bitcoin is overbought. Source: Santiment
On October 27, Glassnode analysts stated that the number of Bitcoin millionaires exceeded 20,000. This did not occur since January 2018, after BTC hit an all-time high at $20,000.
The high percentage of Bitcoin addresses being in profit indicates the number of potential investors that could sell BTC has risen. The analysts tweeted:
“THE NUMBER OF #BITCOIN MILLIONAIRE ADDRESSES (ADDRESSES HOLDING ≥ $1M WORTH OF $BTC) CROSSED 20,000. IT IS THE HIGHEST VALUE SINCE JANUARY 2018.”
Bitcoin correcting after a two-month-long rally is positive for two reasons. First, it offsets the overly enthusiastic market sentiment and neutralizes both spot and derivatives markets. Second, it would be considered a normal market reaction in anticipation of major macro events, like the election.
What happens next?
Technically, Bitcoin consolidating above the $13,200 to $13,300 support range strengthens the base of the rally.
Cantering Clark, a trader and a technical analyst, said:
“THAT 12.9 IDEA IS FOR A FLUSH OF THE LOW BUT NO NEED TO THINK TOO MANY LEVELS OUT GIVEN HOW STRONG THE TREND HAS BEEN. BEST TO DEAL WITH THE FIRST STICKY AREAS. THIS 13.2-13.3 AREA IS A GOOD AREA TECHNICALLY FOR US TO FIND A BASE.”
The short-term moving averages show that the $12,200 to $12,500 range remains a significant support area. As long as BTC stays above $12,200 and reclaims $13,300 even after a substantial pullback, the overall structure would remain positive.
Bitcoin, presently ranked #1 by market cap, is down 2.91% over the past 24 hours. BTC has a market cap of $247.6B with a 24-hour volume of $31.12B.