Bitcoin price has nosedived: 4 reasons it will recover and hit ATH

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As a seasoned crypto investor with a decade of experience under my belt, I’ve seen enough market cycles to know that Bitcoin corrections are part and parcel of its journey towards new highs. The current dip is no exception, and I believe we’ll see BTC rebounding soon.

The price of Bitcoin has taken a sharp downturn, entering what’s known as a technical correction, just a few days following its achievement of a new all-time high.

As a researcher studying the cryptocurrency market, I’ve observed an interesting development with Bitcoin (BTC). After hitting a new record high of $108,250 at the start of this week, it has largely reversed its gains this month, experiencing a 13% drop. This has pushed Bitcoin into a local correction phase. However, I believe there are four compelling reasons why we might see Bitcoin prices rebound and potentially retest the all-time high again:

Bitcoin price corrections are not new

A primary factor indicating the potential increase in BTC’s price is that the current dip, as we forecasted, is not unprecedented. Historically, Bitcoin tends to experience significant downturns following a surge past a key resistance threshold.

The graph over an extended period demonstrates that Bitcoin reached a peak of $19,778 in December 2017, which was followed by a decrease of 84%. After reaching a record high of $64,647 in April 2021, it subsequently plummeted by 55%. More recently, Bitcoin hit a new maximum of $73,885 in March and has since dropped by approximately one-third up until August.

A robust recovery is anticipated following this withdrawal due to Bitcoin’s solid foundation. The production from Bitcoin mining has decreased since the previous halving, while the quantity of Bitcoin stored in exchanges remains low. In a similar vein, spot Bitcoin ETFs have accumulated more than $34 billion in assets, a trend that is projected to persist, particularly from institutional investors.

Bitcoin’s MVRV score is still low

One potential cause for a Bitcoin price increase is that the Market Value to Realized Value (MVRV-Z) ratio, which compares the market value of a cryptocurrency to its realized value, remains lower than during previous market corrections. This score is calculated by subtracting the realized market cap from the circulating market cap and then dividing the result by the standard deviation.

As reported by CoinGlass, the MVRV score (Market-Value to Realized-Value) of Bitcoin reached a high of 2.89 earlier this week. During the market downturn in March of this year, Bitcoin’s MVRV score was 3.05, and it also hit 3.21 during the correction in January 2022, as well as 5.25 back in March 2021. This indicates that Bitcoin may have more room for growth when the current sell-off calms down.

Bitcoin whale accumulation is going on

Significant Bitcoin holders continue to amass more coins, fueling expectations of strategic reserves. MicroStrategy, for instance, has increased its BTC portfolio, now possessing approximately 439,000 coins. Marathon Digital Holdings Inc., the largest Bitcoin mining company, currently holds over 44,300 coins, while Riot Blockchain and Hut 8 Mining Corporation have also accumulated thousands more.

Following MicroStrategy’s impressive growth, it seems that many other companies may decide to invest in Bitcoin. In the last four years alone, MicroStrategy has evolved from a small tech startup into a multi-billion dollar enterprise worth around $80 billion.

Furthermore, talks about establishing a strategic Bitcoin reserve, notably led by Donald Trump, are gaining momentum. Notably, Bitwise suggests that other nations might also consider this move given the significant rise in the U.S. national debt, which currently stands at over $36.4 trillion.

Bitcoin price has bullish technicals

Ultimately, Bitcoin’s price has developed robust bullish technical formations if we consider a wider viewpoint. On the weekly scale, the digital currency appears to have created a cup shape from late 2021 up until March this year. Subsequently, it formed a handle between March and October, followed by a significant recovery.

As an analyst, I’ve observed that Bitcoin has surged in the majority of weeks following the period we’re considering, which isn’t unusual for an asset moving upwards – it’s common for such assets to momentarily pause their advance. The anticipated peak for this bull run is set at around $122,000. This target was calculated by measuring the depth of the ‘cup’ formation at approximately 76%. By adding 76% to the upper boundary of the cup, we arrive at the estimated target price of $122,000.

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2024-12-20 17:07