Bitcoin has experienced a strong bullish reversal this year, with the price surging by 70% since hitting a low of $16,800 in November 2022. This rally has defied fears of interest rate hikes and has been fueled by growing optimism surrounding the approval of exchange-traded funds (ETFs) for Bitcoin. However, as Q3 comes to a close, there are concerns about whether the price of Bitcoin will crash again in the coming months.
From a technical standpoint, the Bitcoin price has stabilized around the 0.236 Fibonacci retracement level, which is drawn from the swing high of $69,000 to the swing low of $15,900. This price action is similar to what was witnessed during the 2018 BTC price correction, where the price stabilized around the 0.236 Fib line at around $6,790 before dropping to $3,000 in December. If history were to repeat itself, a breakdown from the current level could see the BTC price drop to $21,500, down 17.75% from its current levels.
Adding to Bitcoin’s downside risks is the strength of the US Dollar. The US Dollar Index (DXY), which measures the dollar’s strength against a basket of foreign currencies, has reached its highest level since November 2022. Throughout 2023, Bitcoin has been negatively correlated with the dollar, meaning that as the dollar strengthens, Bitcoin’s upside prospects could be limited.
On-chain metrics for Bitcoin are also painting a mixed outlook. The coin days destroyed (CDD) metric, which measures the actions of long-term investors, spiked on September 19, suggesting possible profit-taking or repositioning. However, the Bitcoin reserves across all crypto exchanges continue to decline, indicating increasing hodling behavior among investors.
Bitcoin trading analysts are also divided on where the BTC price may be headed in the months ahead. Some analysts believe that the BTC price could hit $30,000 by October, citing thin ask liquidity near $27,000 as a possible catalyst for a breakout. However, others do not rule out a price correction toward $18,000 based on a pre-halving fractal.
In conclusion, while Bitcoin has experienced a strong bullish reversal this year, there are concerns about whether the price will crash again in the coming months. Technical indicators, the strength of the US Dollar, and on-chain metrics all suggest potential downside risks for Bitcoin. Traders should proceed with caution and conduct their own research before making any investment decisions.
