Cryptocoin – Bitcoin’s price rose to $ 11,300. Three important factors now show that a short term retreat is likely due to the overheating of the BTC rally.
Bitcoin (BTC) price has increased from $ 10,995 to over $ 10,300 in the past 12 hours. However, the momentum of BTC also increases the price of other top cryptocurrencies, including Ethereum (ETH), while key metrics and technical patterns show an increased chance of retraction.
Three factors that point to the decline are the fear and greed index, a potential Wyckoff model, and great resistance.
Crypto Market Feeling Indicates “Greed”
According to the data obtained from Alternative.me’s Crypto Horror and Greed Index, the feeling of the market is in greed. The index reached 75 points and Bitcoin experienced a correction when the index reached a clear peak.
The index was last reached in February 2020, a local peak of 65 points. A month later, Bitcoin’s price dropped to $ 3,596 in BitMEX.
Historical data shows that BTC tends to retreat when the index breaks a new record. However, the way market sensitivity is measured is quite subjective. For example, 30% of the index consists of social media and surveys, which are data that cannot be measured.
In a long bull market, cryptocurrencies can overheat for a long time, as seen in 2018 and 2019. As an example, the price of Bitcoin had risen to $ 14,000 in June 2019 before withdrawing.
Bitcoin Faces Strong Resistance
Bitcoin’s price has risen from $ 11,200 to $ 11,400 three times in the past three days, but a correction came later. Metrics showing that the Bitcoin rally is overheating are insufficient on their own. However, when combined with a relevant market structure, a downside scenario claim can be strengthened.
Historically, there is an inanimate resistance between $ 11,500 and $ 14,000. Hence, sellers have a good chance of trying to defend the $ 11,200 to $ 11,400 resistance range.
When buyers break the strong resistance zone, the larger upward trend increases. Trader Michael van de Poppe announced that a break above $ 11,200 could trigger a rally to $ 11,700 and said, “The important threshold is still $ 11,200. After that, the level of $ 11,500-11,700 ”.
Glassnode CEO Rafael Schultze-Kraft created a similar concern. He determined the historical BTC price cycles and said, “We will never see BTC under $ 10,000 again.”
A Potential Wyckoff Formation and Head and Shoulder Model
Meanwhile, the popular Bitcoin trader FilbFilb emphasizes that BTC / USD can create a Wyckoff pattern that typically results in a steep downtrend. Despite the objection to the viability of the Wyckoff formation, when combined with other metrics, the probability of a distribution phase increases.
Another trader noted that in the short term, BTC faces a possible head and shoulder (H&S) formation. In technical analysis, the H&S pattern is widely recognized as a signal for the top of a market. Bitcoin’s momentum seems to be on buyers’ side because it has repeatedly tested the key resistance level. In the near term, it is facing strong resistance and two bear patterns that can cause a downtrend.