Is Bitcoin Price Going To Drop More?

Bitcoin (BTC) has experienced a significant correction since its peak in March 2024, falling from around $74,000 to below $60,000. Several factors have contributed to the cryptocurrency’s downturn, including the long-anticipated Mt. Gox reimbursements, the US and German governments liquidating their seized BTC, and the impact of the yen carry trade unwinding on global markets.

These elements raise concerns about whether Bitcoin’s price will continue to decline or if a recovery is on the horizon.

On-Chain Bitcoin Data Signals Massive Profit-Locking Trend Ahead

Despite the recent correction, over 84% of Bitcoin addresses remain in profit, according to data from Glassnode.

Historically, such high levels of profitability have coincided with local market tops, often preceding significant price corrections, as seen in the 2021 and 2022 bear markets.

The chart reveals that when the percentage of profitable addresses exceeds 90%, Bitcoin often faces increased selling pressure. This selling typically comes from investors who aim to secure profits, fearing a potential market downturn.

So, within this high-profitability range, Bitcoin may face continued downside pressure.

Bitcoin Peak Fractals Raise 38% Crash Risks

A closer examination of Bitcoin’s weekly price chart suggests that the cryptocurrency may mirror previous market trends.

The highlighted red areas in the chart represent local peaks where Bitcoin’s price faced significant resistance. Notably, these areas align with overbought conditions in the Relative Strength Index (RSI), leading to sharp declines.

Currently, Bitcoin’s RSI is showing similar overbought signals, having formed lower highs even as the price reached higher levels, a classic bearish divergence.

This pattern indicates weakening bullish momentum, which, if it plays out as it did during previous cycles, could lead Bitcoin’s price toward the 200-week Exponential Moving Average (EMA), a critical support level around $36,750, down about 38% from the current price levels.

Conversely, BTC’s price could undergo a bullish reversal from its 50-week EMA (the red wave) if its RSI holds above 41, its prevailing support level.

Bitcoin May Rebound to $80K, After All

While the bearish indicators are concerning, Bitcoin’s price action also shows the potential for a bullish reversal. The weekly chart highlights a Bull Flag pattern—a continuation pattern that, if confirmed, could propel Bitcoin back toward its previous high of $80,000.

The flag pattern is characterized by a downward-sloping channel (flag) following a strong upward movement (flagpole). Bitcoin’s recent price action fits this description, with the cryptocurrency trading within a tight range after its March 2024 peak.

Bull flags resolve when the price breaks above the upper trendline and rises by as much as the height of the flagpole. Applying the same technical rule to the current BTC price action yields $80,000 as the ultimate bull flag upside target.

Fundamentally, the Federal Reserve’s potential rate cut in September and a persistent holding sentiment among Bitcoin’s long-term investors—per Glassnode’s latest on-chain report—may boost the bull flag breakout scenario.