Peters also pointed to a bearish divergence on the technical chart, while warning of weakening upward momentum and potential for trend reversal that could see prices fall.
The MACD histogram, an indicator used to gauge trend strength and trend changes, has produced lower highs, contradicting higher highs on the price chart, confirming the bearish divergence.
Macro factors
Supporting the case for a price pullback are rising U.S. inflation-adjusted bond yields, as discussed last week.
The 30-year inflation-adjusted yield, or real yield, has turned positive for the first time since June 2020, and the 10-year real yield has risen to -0.80% from lows near -1.05% observed last month, according to data provided by the U.S. Treasury.
A continued rise in yields could push the U.S. dollar higher, putting selling pressure on equities and bitcoin. Stock markets are trading down at press time, with the S&P 500 futures nursing a 0.6% drop on the day.
How low might bitcoin go?
“The pullback can easily extend to the former resistance-turned-support near $42,000,” Joel Kruger, currency strategist at LMAX Digital, told CoinDesk. Markets typically shake out weak bulls with a drop to former hurdle-turned-support levels before extending bull runs.
Bitcoin turned lower from its then-record high of $41,962 on Jan. 8, establishing that level as crucial resistance and slipped to $30,000 in the following days. The newfound resistance was a scaled on Feb. 8 after electric maker Tesla announced its $1.5 billion bitcoin purchase.
Crypto analysts expect other corporates to emulate Tesla’s decision to buy bitcoin. However, they may look to invest on price pullbacks, according to Lifchitz.
“$50,000 looks like the first stop for a mild pullback, but a second leg down could take it down to $40,000, while the $30,000 zone looks like the ultimate bottom should things turn ugly in the short term,” Lifchitz said.
However, Patrick Heusser, head of trading at Swiss-based Crypto Finance AG, said $52,000 is major support, adding that a significant correction may remain elusive, as the derivatives market is no longer exhibiting excess bullishness.
Bitcoin’s average funding rate, or the cost of holding long positions in the perpetual futures listed on major exchanges, declined (normalized) below 0.08% early today, having peaked at multi-month highs above 0.12% last week, according to Glassnode data.
While analysts stand divided on possible magnitude of an impending correction, they expect the cryptocurrency to eventually go on to achieve new record highs above $60,000.
“We believe markets are displaying a healthy correction,” Dibb said. “Both BTC and ETH are still trading within an upward channel, and momentum is still skewed towards the bids.”
