Bitcoin Drops Below $65,000, Fear Grips the Market: Is it Time to Buy the Dip?Although the overall crypto market has been relatively subdued since the start of this bull run, except for Bitcoin and a few mainstream tokens, optimism in the market is rising with the Federal Reserve expected to enter a rate-cutting cycle. This has fueled anticipation of an upcoming bull run
Bitcoin Drops Below $65,000, Fear Grips the Market: Is it Time to Buy the Dip?
Although the overall crypto market has been relatively subdued since the start of this bull run, except for Bitcoin and a few mainstream tokens, optimism in the market is rising with the Federal Reserve expected to enter a rate-cutting cycle. This has fueled anticipation of an upcoming bull run. However, Bitcoin's recent challenge of $65,000 was met with a pullback, and is currently trading at $57,500 as of this writing (2nd). The Crypto Fear & Greed Index stands at 26, indicating fear in the market.
The Bitcoin Puell Multiple, a metric measuring miner selling activity, is considered a signal for dollar-cost averaging when it falls below 0.6. Currently, the index sits at 0.69, approaching the "decision zone" between 0.6 and 0.8. This suggests one of the best buying opportunities in over two years.
Historically, Bitcoin has performed poorly in September, experiencing an average decline of 4.5%. If the support level between $55,500 and $56,500 is breached, further dips to around $51,000 could be expected. Based on historical halving cycles, Bitcoin is likely to break out of the "post-halving accumulation range" at the end of September, though September as a whole may be characterized by consolidation. Closing the week above $58,450 is crucial for establishing the $58,000 area as support, which is currently being tested.
The last week of August saw increased short-selling activity, potentially leading to a two-sided liquidity sweep, or a "death cross" for both bulls and bears. From a trading perspective, I lean towards buying. Ideally, Bitcoin would dip to around $56,600 to fill the CME gap (Chicago Mercantile Exchange launched Bitcoin futures in 2017 and will remain closed on weekends, resulting in a price difference between Friday's closing price and Monday's opening price, commonly known as the "gap". These gaps are usually filled by price fluctuations) before initiating a long position. If Bitcoin rebounds from around $56,000, the potential upside target could be $61,300, where there is significant sell-side liquidity, potentially acting as a significant short-term resistance level.
The daily chart shows Bitcoin testing the $56,000 support level, with the Relative Strength Index (RSI) falling below the 50% mark, further indicating potential bearish momentum. If the $56,000 support level breaks, the next major support level could be around $52,000.
On-chain Data and Market Sentiment:
Alongside Bitcoin's price fluctuations, on-chain data offers valuable insights into the inner dynamics of the market. One key metric is the Bitcoin exchange reserves, which assess the amount of Bitcoin held in exchange wallets. Recent data reveals a decline in this figure, suggesting a period of accumulation in the market. As Bitcoin reserves on exchanges dwindle, the possibility of a supply squeeze increases, potentially triggering further price gains.
Despite the overall market downturn, the number of Bitcoin whales holding over 100 Bitcoin has reached a 17-month high, witnessing an increase of 283 new wallets in August alone. While predicting Bitcoin's price trajectory in September, this influx of whales suggests heightened confidence in Bitcoin's long-term profitability, potentially leading to bullish momentum in the coming months.
Bitcoin may experience a rebound in September, though the road ahead will not be smooth. Keep a close eye on key support levels at $56,000 and $52,000, alongside market sentiment and on-chain data. Buy when it's time to buy, and act when it's time to act.
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