Why did Bitcoin price fall today?
Bitcoin (BTC) price sold off on December 11, falling about 7.5% to around $40,640. Several factors contributed to the price decline.
Bitcoin Indicator Shows Overbought Correction
The decline in Bitcoin price on December 11 shows that leverage extinction occurred amidst an overbought situation.
In particular, the cryptocurrency’s daily relative strength index (RSI) has exceeded 70 since December 5, suggesting that it is overvalued. An overbought RSI typically leads to local market highs as there are fewer buyers and more sellers.
On-chain indicators also show that there is upside potential among traders.
For example, Bitcoin’s Net Unrealized Profit/Loss (NUPL) indicator, which measures the percentage of investors generating profits, surged above 0.5 for the first time since December 2021.
This means that most Bitcoin investments are currently sitting on unrealized gains, with the odds of taking profits off the current market high increasing.
Bitcoin miners are among those benefiting
Tracking the reserves of Bitcoin miners makes the monetization scenario more robust.
For example, Bitcoin’s decline on December 11 was due to a significant decline in miners’ BTC holdings, according to wallet data tracked by CryptoQuant. This coincides with increasing BTC flows to cryptocurrency exchanges from miners, indicating that they are willing to sell or are already selling.
As you can see, miners are locking in profits due to the 2024 halving event, which will reduce their rewards by half. With increased competition resulting from rising hash rates, BTC miners are likely to adopt strategies that strengthen their cash reserves.
Bitcoin wants RECT
Today’s decline in Bitcoin price coincides with the liquidation of $87 million worth of long positions in the BTC derivatives market. In comparison, only $9.91 million worth of short positions were liquidated.
When the market liquidates a large number of long positions, a significant amount of the asset is suddenly sold. This can trigger stop-loss orders set by other long traders, putting more selling pressure on them.
Are there any more downsides to Bitcoin?
From a technical perspective, Bitcoin’s decline today is part of a dominant consolidation trend that has been drawing a bullish pennant setup, confirmed by a triangle-shaped sideways trend.
A bullish pennant is a rising continuation pattern that forms after a strong upward trend. It usually resolves when the price crosses the upper trend line on high volume and rises by the size of the asset’s previous uptrend.
As a result, BTC’s price is likely to remain in the pennant range and rebound towards the established upper trendline near $44,000. However, if a decisive breakout occurs, the price could rise to $50,000 in the new year or January 2024, at which time the U.S. Securities and Exchange Commission is also expected to make a decision on a Bitcoin exchange-traded fund.
Bullish sentiment further improved with the formation of two lower long candle wicks on the December 8th and 11th candles. This represents a bullish rejection. Nonetheless, bad fundamentals, such as a potential spot Bitcoin ETF rejection or delay, could invalidate the upside scenario.
In this case, Bitcoin risks falling below the pennant support around $42,000 and deserves further upside towards the 50-day exponential moving average (50-day EMA, red wave) around $37,480.
This article is written for general information purposes and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
