Bitcoin ($BTC) hit $106,500 early on Monday, giving the bulls renewed hope that this current price surge will continue. However, most indicators are now signalling a very overbought condition for Bitcoin, which could mean that the next correction is about to begin.
Sentiment, politics, and demand all favour Bitcoin
Not just the price, but sentiment for Bitcoin is at an all-time high. The Fear and Greed Index is pointing to Extreme Greed at a level of 83. This indicator has been around the 80 level for the past month, showing that the bulls are firmly in control.
On the political side of things, the incoming Trump administration has plenty of pro-crypto people in the highest positions, and the appointment of a Crypto Czar in David Sacks should provide much positive influence for the sector going into Trump’s second term in office.
For demand, besides the distinct possibility that sovereign nations, including the US, Russia, China, etc., are about to embark on a buying race, for the U.S. Spot Bitcoin ETFs, Blackrock alone has bought more than 25,000 BTC in just the last seven trading days.
With such tailwinds behind Bitcoin, it is to be wondered how the price can go down. That said, this is a market, and as any asset gets to very overbought conditions, there will be counteractive forces that will only continue to get stronger as the price goes up.
$BTC price touches top of ascending channel
Source: TradingView
The 4-hour chart for $BTC does show that the price has touched the top of the ascending channel. Given the selling wick, and the fact that $BTC is overbought on most time frames out to a week, it would be expected that the price might now head back down for some kind of correction.
The bottom of the channel is one area of interest, plus the $99,000 horizontal level is becoming important support/resistance.
RSI points to rejection for exhausted bulls
Source: TradingView
Zooming out into the 5-day chart, one can see the parabolic nature of this latest surge in the Bitcoin price. However, looking at the bottom of the chart, it can be seen that the Relative Strength Index (RSI) is nudging right up against a descending trendline that comes from before the two peaks of the previous bull market in 2021.
Given the potentially exhausted state of the Bitcoin bulls, it is unlikely that the indicator line will be able to press on through the descending trendline, and therefore a rejection does look more likely. Although this could just be a return to the 70 level before bouncing higher again. It could also take around a month for this to play out.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
