Bitcoin Correction at Hand

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Rania Gule, Senior Market Analyst at XS.com, believes a Bitcoin price correction is imminent.

Gule points to several factors to support this view, including:

Declining Institutional Demand:

Recent data on outflows from exchange-traded funds (ETFs) showed a decrease of $123 million, reflecting weak interest from institutional investors.

Gule argues that this decline in institutional demand, combined with significant profits realised by long-term holders, has pushed the market into a phase of re-accumulation. This re-accumulation phase suggests that volatility may persist before a return to upward momentum.

Technical Indicators:

While moving averages indicate a short-term bullish trend for Bitcoin, a price break below the signal line suggests selling pressure, potentially signalling further declines.

Gule believes Bitcoin cannot sustain growth above $100,000 without experiencing a pullback. This correction is necessary to consolidate Bitcoin's gains and stabilise the market for a continued upward trend in the medium and long term.

Overheated Market:

Gule raises concerns about an “overheated market,” with the current Bitcoin price far exceeding the historical support level at $66,000, a strong barrier against price collapses since 2017.

This level could become a critical starting point in the event of a deep correction. She predicts a high likelihood of a correction in the coming weeks to "cool down" the market, bringing the price correction in line with historical patterns. Without this correction, Gule anticipates short- to medium-term disruptions due to the sharp price increase, leading to uncomfortable volatility for investors.

Macroeconomic Factors:

Despite the excitement surrounding Bitcoin, the U.S. Federal Reserve's monetary policy could significantly impact the coin's future direction. While some anticipate the Fed to lower interest rates again, this could further increase volatility in Bitcoin markets.

Additionally, Bitcoin’s declining market dominance, with its share dropping from 60.1% to 57.9%, indicates a redistribution of funds toward alternative cryptocurrencies, adding pressure on Bitcoin.

Despite her prediction of a short-term correction, Gule maintains a positive long-term outlook for Bitcoin.

Factors contributing to this optimism include:

Increasing institutional interest, particularly with the presence of cryptocurrency ETFs, could bolster Bitcoin's position in global markets.

The limited supply of Bitcoin could drive price increases, as observed in previous cycles.

Long-term projections for Bitcoin remain positive, particularly with growing institutional interest, making it a standout investment opportunity.

Gule anticipates further market volatility, with potential liquidations and high funding levels leading to a temporary correction.

However, she believes this correction is necessary for sustainable growth, and once Bitcoin surpasses the $100,000 mark, a new phase of continuous growth could begin.