Critical Technical Signal Suggests Bitcoin Price Will Likely Reverse

Nick Chong

Last Updated: June 11, 2024 2:07 pm

2 mins read

Reason to trust

Strict editorial policy that focuses on accuracy, relevance, and impartiality

Created by industry experts and meticulously reviewed

The highest standards in reporting and publishing

How Our News is Made

Strict editorial policy that focuses on accuracy, relevance, and impartiality

Ad discliamer

Morbi pretium leo et nisl aliquam mollis. Quisque arcu lorem, ultricies quis pellentesque nec, ullamcorper eu odio.

Bitcoin has undergone an extreme rally over the past two weeks. The coin has surged from $11,200 to $13,000 as of this article’s writing, with the rally topping on Saturday evening at $13,350.

While BTC is heading into the weekly close around $13,000, which is a pivotal win for bulls, analysts are wary of a drop from here. There are some signs indicating that the cryptocurrency may be overbought in the near term, having rallied over $1,500 in around a week’s time.

Bitcoin Likely to Soon Top: Analysis

Bitcoin may be nearing a medium-term high, analysts fear as some indicators suggest the coin is overbought. One analyst shared the chart on October 25th, noting that the cryptocurrency is currently rubbing up against notable resistance from 2019.

Furthermore, the Fisher Transform, a trend indicator, is currently at highs not seen since August, May, and February of this past year. Each of these periods marked short-term highs in the price of Bitcoin.

Chart of BTC's price action over the past year with analysis by crypto trader Moe (@Moe_momentum_ on Twitter). 
Source: BTCUSD from TradingView.com

JP Morgan Indicates BTC Could See Short-Term Drop

JP Morgan analysts are also fearing a retracement.

The firm recently released a report about Bitcoin’s short-term and long-term outlook to its institutional clients. According to copies of the report shared through Twitter, JP Morgan analysts currently believe that the crypto-asset is overvalued per futures data.

https://twitter.com/classicmacro/status/1320051931105153027

The firm cited its market positioning indicator, derived from the trends in the Bitcoin futures market on the CME:

“To infer positioning in bitcoin futures, we use our open interest position proxy methodology, where we look at the cumulative weekly absolute changes in the open interest multiplied by the sign of the futures price change every week.”

According to their analysis, the positioning indicator is currently reaching new year-to-date highs. This suggests that Bitcoin looks “rather overbought and vulnerable to profit-taking.”

Importantly, crypto-native derivatives platforms are not yet showing this vulnerability. With funding rates of leading BTC perpetual futures markets still in the neutral to even negative territory, there may be no incentive for long position holders to close out early.