Bitcoin (BTC) has been experiencing a bullish reversal in 2023, with the price surging by 70% since hitting a low of around $16,800 in November. This upward trend has defied concerns over rate hikes and has been driven by growing optimism surrounding the approval of Bitcoin exchange-traded funds (ETFs).
However, despite this positive momentum, Bitcoin bulls have struggled to sustain the price above $30,000 in recent months. As a result, many traders are questioning whether the Bitcoin price will crash again in the coming months, especially considering that the next halving event is still over 200 days away.
A closer look at the technical indicators reveals that the Bitcoin price has stabilized around the 0.236 Fibonacci retracement level. This level is drawn from the swing high of $69,000 to the swing low of $15,900. The current price action is reminiscent of the 2018 correction, where the BTC/USD pair remained stable around the 0.236 Fib line at $6,790 before dropping to $3,000 in December. In 2018, the $3,000 level coincided with a multiyear ascending trendline support, which is now marked as bear market support on the chart. If Bitcoin follows a similar pattern, a breakdown from the current level could lead to a price crash down to the next major support at $21,500, representing a 17.75% decline.
Another factor that could contribute to Bitcoin’s downside risks is the strength of the U.S. Dollar Index (DXY). The DXY, which measures the greenback’s strength against major foreign currencies, has reached its highest level since November 2022. Throughout 2023, the DXY has exhibited a negative correlation with Bitcoin. The dollar’s recent advance has been accelerated by the United States Federal Reserve’s rate decision in September, and the DXY is currently showing its 11th consecutive green weekly candle. If the dollar continues to strengthen, it could limit Bitcoin’s upside potential.
On-chain metrics also provide a mixed outlook for Bitcoin. The coin days destroyed (CDD) metric, which measures long-term investors’ actions, spiked on September 19, indicating that some long-term BTC holders moved their coins, possibly for profit-taking or repositioning. Historically, most CDD spikes have preceded price declines. However, Bitcoin reserves across all cryptocurrency exchanges continue to decline, suggesting increasing hodling behavior among investors.
Bitcoin trading analysts are divided on the future direction of the BTC price. Some analysts, such as Skew, suggest that the BTC price could reach $30,000 by October, citing thin ask liquidity near $27,000 as a potential catalyst for a breakout. Conversely, analyst Rekt Capital does not rule out a price correction toward $18,000 based on a pre-halving fractal. According to Rekt Capital, the next 140 days will be crucial for dollar-cost-averaging in preparation for the post-halving parabolic rally, and if a price retracement is to occur, it is likely to happen during this period.
It is important to note that this article does not provide investment advice or recommendations. Trading and investing in Bitcoin carries risks, and readers should conduct their own research before making any decisions.