Bitcoin Price Correction Predicted Amid Declining On-Chain Activity

Bitcoin's price rally has stalled, with technical analysts predicting a further price correction and identifying four crucial support points. On-chain activity has declined to multi-year lows, but long-term holders remain positive, anticipating a local bottom.

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Bijay Laxmi
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Bitcoin Price Correction Predicted Amid Declining On-Chain Activity

Bitcoin Price Correction Predicted Amid Declining On-Chain Activity

As Bitcoin struggles to kick off the next bull run following a 15% price dump in April, technical analysts are predicting a further price correction for the world's largest cryptocurrency. According to recent analysis, Bitcoin's price rally has stalled over the past couple of months, with the market currently in a consolidation phase that is expected to end soon.

Why this matters: The potential price correction of Bitcoin could have significant implications for the global cryptocurrency market and investors. A decline in Bitcoin's value could also impact the overall sentiment of the market, leading to a ripple effect on other cryptocurrencies and the broader financial market.

Technical analysis has identified four crucial support points that may influence Bitcoin's price movement in the near future: $53,500, $51,800, $59,800, and $52,800. The $51,800 level is of particular interest, as it not only serves as a key support point but also poses the risk of a bear trap, where a false breakdown lures sellers into a trap, only to be followed by a rapid price increase.

Adding to the concerns surrounding Bitcoin's price trajectory is the decline in on-chain activity on the Bitcoin network. Data analytics firm Santiment has revealed that various metrics, including transaction volume, daily active addresses, and whale transaction count, have all fallen to multi-year lows. The transaction volume, in particular, has dropped to its lowest point in the past decade.

Santiment notes that the decline in on-chain activity is more indicative of "crowd fear and indecision" amongst traders, rather than an imminent price dip. This underscores the connection between on-chain activity and sentiment in the Bitcoin market.

Despite the bearish indications from stagflationary US economic data and hawkish remarks by Federal Reserve officials, long-term Bitcoin holders remain positive. According to CryptoQuant data, these holders did not sell their holdings even after Bitcoin reached its all-time high of $73,000 in March 2024. On-chain analyst Axel Adler Jr noted that long-term holders are currently retaining their assets, anticipating a local bottom.

As of May 12, 2024, the price of Bitcoin sits just above $60,770, with a mere 0.2% price dip in the past day. The market is closely watching major economic data and upcoming events, including PPI and CPI reports, as well as a speech from Fed Chair Jerome Powell, which may influence Bitcoin's trajectory in the coming weeks. While historical trends suggest an extraordinary bull run after the halving event, the current market sentiment highlights certain speedbumps, making it uncertain whether the historic trend will repeat itself.

Key Takeaways

  • Bitcoin's price rally has stalled, and a further correction is predicted.
  • Four crucial support points: $53,500, $51,800, $59,800, and $52,800.
  • On-chain activity has fallen to multi-year lows, indicating "crowd fear and indecision".
  • Long-term holders remain positive, anticipating a local bottom.
  • Market sentiment is uncertain, with upcoming economic data and events influencing Bitcoin's trajectory.