Bitcoin (BTC) is currently showing as overbought according to a technical indicator which might mean an end to the current rally followed by another price drop. This information comes at a time when the current price surge is seeing the emergence of a new wave of optimism after a difficult 2018.
Some analysts predict that BTC could go as high as $6,500 while others think that the top-ranked cryptocurrency is set to enter another parabolic phase that would mean a new all-time high. The next step for Bitcoin would be to either break through the $6,000 psychological barrier or fall back to sub-$4,000 levels.
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History Repeating Itself for Bitcoin
While bulls and enthusiasts alike are no doubt enjoying the recent surge in Bitcoin (BTC) price, information from one technical indicator might put a dent on those positive sentiments. According to Bloomberg, the GTI Global Strength Indicator currently shows Bitcoin to be at its most overbought level since the massive bull run of late 2017.
Usually, an asset in the overbought position means that downward price action is imminent given the level of demand saturation in the market. Back in 2017, when BTC was such a level, it plummeted downwards from close to $20,000 in mid-December 2017 to $6,000 by the start of February 2018.
Speaking to Bloomberg, David Tawil of ProChain Capital opined:
“We continue to expect another leg downward. It’s nice to see a positive move as opposed to a negative move, certainly. But at the same time, for investor purposes, it’s not a particularly comforting move. Certainly, an investor would much rather see a gradual rise with constant floors in terms of downside being established, as opposed to a very, very quick run-up. It could easily be easy come, easy go.”
For the bearish end of the spectrum, the GTI Global Strength Indictor highlights their sentiment about the current state of the market despite the bullish break out seen thus far in April 2019. For many bears, the underlying belief is that the market fundamentals have yet to change and thus the present price swing is merely a short squeeze which will be followed by another price downturn.
Long Term Bitcoin Bottom
While the bears call a short squeeze and possible price reversal, popular BTC trader Peter Brandt speculates that Bitcoin could be entering another parabolic phase. If this prediction turns out to be accurate then the top-ranked cryptocurrency could be set for another massive bull run similar to the late 2017 “moonshot.”
However, Brandt does add a caveat for BTC bulls to consider and this, there is a possibility that the current run is a false positive that will set up another price drop to $3,100. This particular price level is Bitcoin’s lowest price mark since it reached $19,700 in mid-December 2017.
Brandt’s analysis again brings up the issue of Bitcoin setting a long-term bottom. In a tweet published on Friday by Plan B, the noted cryptocurrency researcher presented evidence to show that BTC will not drop below $2,000.
Meanwhile, Tone Vays, a former Wall Street analyst with a penchant for calling BTC shorts says a downward price movement appears more feasible than a move in the opposite direction, at least in the short-term. According to Vays, Bitcoin is yet to bottom out, as he predicted a worst-case scenario of BTC reaching $1,300.
However, positive sentiments remain strong among Bitcoin bulls and enthusiasts. Speaking to CNBC, Brian Kelly, the founder of BKCM LLC said that BTC could break the $6,000 psychological barrier and even go as high as $6,500.