Decentral Block Post

Bitcoin price is down 5% over the last 24 hours to trade at $41,645 on Dec. 11. Despite the sharp price correction, technical indicators and on-chain data show that Bitcoin (BTC) still displays strength as bulls strive to push the price back above $44,000.

On-chain data shows Bitcoin price “over-extended”

Bitcoin dropped as much as 7.2%, falling to $40,300 on Coinbase, triggering a conversation among analysts. Julio Moreno, head of research at on-chain analytics firm CryptoQuant, said that the flagship cryptocurrency’s price was “overheating after the recent rally above” the $40,000 psychological level. 

More data from on-chain data analysis firm Lookintobitcoin highlighted exhaustion among bulls. According to its December 2023 report, Bitcoin’s price has reached its golden ratio multiplier near-term target, highlighted by the Crosby Ratio, which shows Bitcoin’s near-term price at “over-extended levels,” resulting in the need to correct, or at least slow down.

The golden ratio multiplier is an indicator that explores Bitcoin’s adoption curve and market cycles to understand how the price may behave in medium to long-term time frames.

In other words, Bitcoin reached overbought conditions above $40,000 as buyer exhaustion set in. Note that the flagship cryptocurrency’s relative strength index (RSI) shows that its has been massively overbought since Dec. 5. 

Bitcoin (BTC) closed last week with gains of 9.55%, but started the new week on a weak note, falling near $40,500. The sharp correction in Bitcoin also caused liquidations in several altcoins. According to CoinGlass data, cross-crypto long liquidations for Dec. 11 were more than $300 million.

The sharp fall does not change the trend in Bitcoin and altcoins, as corrections are a part and parcel of any uptrend. Generally, vertical rallies are followed by sharp pullbacks, which shake out the weaker hands and allow long-term investors to buy more at lower levels.

The corrections are unlikely to stretch longer due to several bullish catalysts in 2024. Analysts expect one or more Bitcoin exchange-traded funds to receive regulatory approval in January, which could be a game changer. That will be followed by Bitcoin halving in April, and finally, expectations of a rate cut by the United States Federal Reserve could boost risky assets. Goldman Sachs anticipates the Fed to start cutting rates in the third quarter of 2024.

What are the important levels that could arrest the fall in Bitcoin and altcoins? Let’s analyze the charts to find out.

S&P 500 Index price analysis

The bulls have successfully held the S&P 500 Index (SPX) above the breakout level of 4,541 for the past several days. This suggests that the buyers are trying to flip the level into support.

Bitcoin (BTC) price finally witnessed a significant 7% pullback on Dec. 11 as multiple indicators flashed sell signals and traders booked profits. Bitcoin’s ability to hold above $42,000 will determine whether this crash is a buy-the-dip opportunity or a general market reversal. 

Short-term volatility or big trend reversal?

The sharp BTC price drop observed on the daily chart corresponds with a sudden 6.5% drawdown and over $300 million long liquidations across the cryptocurrency market.

Zooming to the longer 1-day candle timeframe, however, this movement appears as a minor retracement in a more extensive bullish trend established over the past few months. Moreover, the relative strength index (RSI) has retreated into neutral territory below 70. 

Last week’s analysis confirmed the strong uptrend that Bitcoin has been in, with significant momentum observed after the price breached the $40,000 mark.

This context suggests that the recent dip could be a short-term fluctuation within a continuing upward trend rather than a general trend reversal, though more downside or sideways actions should not be ruled out for the days ahead.