Bitcoin Price Risks Crashing Again

Bitcoin may experience a minimum 20% decline in the coming weeks after its retest of a technical resistance level that it has surpassed for several months

After three weeks since its lowest point in approximately two months, Bitcoin ($67,046) increased by over 19%, reaching an estimated $67,270 on May 20, three weeks after it dropped to around $56,550. A sharp correction is conceivable, however, in the coming days. 

Indicators of a decline in inflation have been the primary driver of this recovery, which has consequently increased bond traders’ anticipation of an interest rate reduction in September rather than November. Furthermore, BTC prices have been augmented by a revival in spot Bitcoin exchange-traded fund (ETF) inflows.

The price of Bitcoin may fall below $54,000.

According to its recent price behavior, Bitcoin is highly susceptible to a significant correction in the coming days.

Significantly, the BTC/USD pair has exhibited a bullish trend within a discernible flag pattern since March, when it surpassed its all-time high near $73,800. The price of Bitcoin was evaluating the upper trendline of the flag for a possible breakout as of May 20.

However, the insufficient trading volume during the breakout attempts increases the likelihood that Bitcoin will experience a pullback.

The subsequent target to the downside is the lower trendline of the flag, which coincides with the 200-day exponential moving average (EMA; the blue wave) and it is anticipated to be around $53,970 by June.

Conversely, a decisive breakout above the upper trendline of the flag could result in a price increase equivalent to the height of the previous uptrend, according to the rule of technical analysis.

Doing so would increase the price of Bitcoin by approximately 25% from its current level to $84,000 by June.

Tether Mints $1 Billion to Satisfy Expected Demand.

Tether (USDT), the largest stablecoin in the world, surpassed $110 billion in market capitalization last week, setting a new all-time high. The potential for this demand for “sideline capital” to propel Bitcoin to unprecedented heights in the coming weeks cannot be ruled out.

An increase in the supply of USDT into circulation contributes to a heightened level of liquidity, thereby freeing up additional USDT-pegged stablecoins that could be utilized in opposition to Bitcoin and other cryptocurrencies. For example, the recently issued USDT significantly contributed to the increase in the price of Bitcoin from $27,000 to $73,000, as reported by Lookonchain.

This new stablecoin supply thus diminishes the likelihood that Bitcoin will experience a significant price decline in the future weeks and months. Nevertheless, Bitcoin must decisively surpass the resistance level of $67,500, per 10x Research, to set new all-time highs.

Bitcoin NUPL suggests a cautious upward outlook.

The Bitcoin Net Unrealized Profit/Loss (NUPL) metric has attained a value of 0.54 as of May 4. This suggests many Bitcoin (BTC) owners are encountering considerable unrealized profits.

Generally, a NUPL value surpassing 0.5 signifies a market sentiment characterized by confidence, which may facilitate additional price escalations. Nevertheless, it is critical to acknowledge that the NUPL has declined since its all-time high of 0.68 in March 2024.