Another record high was registered by Bitcoin a few hours ago as it hit $37,780 for the first time according to Tradingview.com. The move has added a further 6.5% to the price over the past 24 hours and a whopping 30% over the past seven days.
It is now trading way above daily moving averages and other technical indicators such as the relative strength index are screaming ‘overbought’. Additionally, the Bitcoin fear and greed index is planted in the 90s signaling ‘extreme greed’.
Such a parabolic move is unnatural and markets need to correct to maintain health and re-establish trend lines. As we have seen in previous rapid-paced rallies, Bitcoin never fails to pullback, sometimes just as hard and just as fast.
Bitcoin Correction Imminent?
Industry analysts and observers have started to warn about an imminent correction for Bitcoin and it is likely the entire crypto market will follow in its usual lemming-like fashion.
CEO and founder of Nuggets News, Alex Saunders, posted a few warning signs such as a large jump in coins to exchanges, and the highest unrealized profits since the peak in December 2017.
I’m waving the yellow flag…
– Large jump in coins sent to exchanges.
– Highest unrealised profits since Dec 2017
– Spike in total number of coins on exchanges
— Alex Saunders 🇦🇺👨🔬 (@AlexSaundersAU) January 6, 2021
Bitcoin moving to exchanges could be a signal that traders and holders are preparing to sell and take profits. Saunders added that trying to time the market will end in tears for the majority of traders, but on a positive note BTC could hit six figures in this cycle;
“I think we are going to $100k this cycle & $1M in the next 10 years. But I don’t want to see any of you get rekt short term. This is the reason for my warning post.”
Also waving the red flag and indicating overbought zones in previous bull markets was chart guru Peter Brandt who stated that ‘historic bull markets become historically overbought’.
Bitcoin $BTC is redefining the concept of “overbought.” Bull markets become and remain overbought. Major bull markets become overbought majorly. Historic bull markets become historically overbought. Red arrows mark midpoints of parabolic advances pic.twitter.com/OZB7IBXPbg
— Peter Brandt (@PeterLBrandt) January 7, 2021
More Momentum For BTC?
Analyst Willy Woo a little more bullish with a chart showing ‘speculative premiums’ compared to previous market cycles. He added that;
“This rally is warm but not yet overheated.”
This does not mean things will not correct before momentum resumes and the rally is over. Average previous pullbacks have been at least 30% so, from current prices that would drop Bitcoin back to around $26k which is still above its former ATH.
There is also the notion that the monster institutional funds that have been hoovering up the asset are unlikely to sell at any price.