Cryptocurrency analysts belive that the Bitcoin market is overheating. Overall sentiment confirms this position, showing that BTC could be in for a drop.
- Sentiment among market participants has drastically shifted from bullish to bearish over the last day.
- At the same time, analysts argue that Bitcoin has reached a market top, and is ready to reverse.
- Looking at the downside, BTC could find support between $7,000 and $6,000.
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Despite the bullish momentum that pushed Bitcoin above $9,000, sentiment analysis shows that investors are getting skeptical, indicating an impending pullback.
Shifting Bitcoin Sentiment
Bitcoin surged more than 27% over the past week, peaking at a high of $9,440. The bullish impulse enabled the flagship cryptocurrency to recover losses incurred during “Bloody Thursday” in March, sending it back to pre-drop levels, said Arcane Research.
During the latest rally, it seems like investors rushed to exchanges to get a piece of Bitcoin’s recent price action.
IntoTheBlock reported that Bitcoin perpetual swap volumes across multiple crypto-derivatives exchanges soared over 200%. On Thursday alone, the volume for perpetual swaps reached a 30-day high of $30.8 billion in notional value.
Bulls shouldn’t get lulled into comfort, however. Over the last day, there has been a significant shift in market sentiment.
Social media data from Santiment reveals that the number of keywords related to selling has outpaced the number of keywords related to buying. “It is fairly typical to see this kind of rapid sentiment shift in a quick price surge,” said Santiment.
Several crypto analysts share the bullish outlook for Bitcoin, with many anticipating a steep price decline for BTC.
Bitcoin Retracement Forthcoming?
Thomas Thornton, the founder of Hedge Fund Telemetry, said that Bitcoin is getting excessively “overbought.” He went on to explain that the flagship cryptocurrency is currently showing “sell” signals.
After analyzing the relative strength index (RSI), the TD sequential indicator, and a proprietary metric, the chartist is confident that Bitcoin is bound for a bearish impulse.
As such, the trading veteran has exited his long Bitcoin positions and has continued to warn other investors about a potential retracement.
Since then, each time BTC rises to the upper boundary of the channel it drops down to hit the lower boundary, and from this point, it bounces back up again.
The bellwether cryptocurrency surged 136% since March, pushing BTC back up against the upper boundary of the channel. The barrier looks to have rejected Bitcoin from advancing further, which could result in a drop towards the middle of the channel, according to TraderXO.
Right now, this lower support barrier is hovering around $6,000.
This pessimistic outlook coincides with crypto-analyst Tone Vays’ predictions. As with other bearish analysts, the Wall Street trader argued that the cryptocurrency market is getting overheated.
As a result, Vays expects prices to revisit the 50-day moving average, which sits at $7,000.
— Bloxlive.TV (@BloxliveTV) April 30, 2020
The different views must be taken with caution, however, since the cryptocurrency market is hard to pin down. While the signals seem bearish in the short term, long term the fundamental reasons to stay in Bitcoin look sound.
Regardless of whether a trader is bearish or bullish, sound risk management is critical during these times of volatility. For most, trading without leverage, or staying out of the market entirely right now, is a sound recommendation.
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