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Bitcoin’s decreasing buyer momentum and high supply in profit could be an early sign that the top is in.
Key takeaways:
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Bitcoin’s recovery could be curtailed by stubborn resistance from the $106,000-$108,000 supply zone.
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Persistent profit-taking could see BTC price drop toward the $100,000 level.
Bitcoin (BTC) price has rebounded by 3% to $106,000 from its weekend lows. However, its failure to decisively break above $106,000 has sparked concerns about whether BTC price could see a deeper correction over the next few days.
Bitcoin could drop on waning buyer momentum
Bitcoin investor behavior data shows a drop in buying momentum, indicating a local top could be in, according to data from market intelligence firm Glassnode.
The chart below shows a drop in Momentum Buyers (investors who buy during uptrends), with the RSI dropping to 20. On the other hand, there is a sharp rise in Profit Takers (investors locking in gains) with the RSI rising to 77.
Glassnode said:
“This trend often shows near local tops, as traders begin locking in gains instead of building exposure.”
Meanwhile, Bitcoin’s supply in profit remains high at 96%, with the price around $105,000 on June 3.
A high number of holders in profit is often seen as a sign of an overheated market, which typically precedes or coincides with price corrections.
As a result of these onchain signals, Bitcoin’s price may see pullbacks over the coming days as investors choose to book profits.
Related: Bitcoin traders predict ‘larger correction’ as BTC price eyes sub-$100K liquidity
Bitcoin price faces stiff resistance on the upside
From a technical perspective, Bitcoin’s latest recovery was curtailed by a supply congestion zone between $106,000 and the previous $109,000 all-time high. When the price was rejected from this level on Jan. 31, BTC dropped 27% to $78,000, suggesting that the bears are aggressively defending this zone.
Bitcoin bulls were required to produce a decisive daily candlestick close above this area to sustain the recovery.
Failure to flip $106,000 into support could lead to a deeper correction in Bitcoin price, with the accompanying long position liquidations pulling the price toward the $100,000 psychological level.
Data from CoinGlass showed a wall of ask orders building up above $106,000 in the 24-hour timeframe, reinforcing the importance of this resistance area.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
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