- Bitcoin shows signs of an imminent price correction or consolidation, suggesting that bears may have the upper hand in the short term.
- If price correction occurs, it could still be considered healthy for the existing uptrend, as long as the price maintains its position above the 200-day SMA.
- Longer-term outlook offers bullish signals, suggesting that Bitcoin’s price may set a new all-time high in the coming months.
Fragile Uptober vibes
Price rally with weakening momentum
Bitcoin had its strongest week in two months, breaking above the key resistance of the 200-day SMA and touching an 8-month descending resistance trendline. During this breakout, the volume increased, signaling strong momentum, but has since gradually decreased as the price continued to climb.
A 4-hour chart suggests that maintaining this momentum could be challenging for bulls. Bitcoin has experienced a bearish crossover with the MACD and shows bearish divergence with both the MACD and Volume Oscillator, indicating that buying pressure is weakening, and the upward momentum might be losing steam.
Record open interest amid decreased volume
The recent rally has been driven by a surge in open interest in Bitcoin futures and increased demand for leveraged positions. Open interest reached a new high for 2024, while funding rates hit their highest levels since June. While higher open interest suggests increased market participation, it also indicates more leverage and speculative trading, making the market more sensitive to price swings. Historically, such spikes in open interest have often been followed by short-term corrections, as seen over the past year.
Source: Checkonchain
During this surge, the trading volume of Bitcoin futures has been in a downtrend, suggesting that traders are either holding their existing positions or adding new ones in anticipation of further gains. A decline in volume while open interest rises could imply that remaining market participants are increasing leverage, which could make the market more vulnerable to abrupt price movements. If this trend continues, a correction could be likely, especially if traders begin closing their long positions to secure profits.
Source: Checkonchain
ETF demand concerns
Another major factor in Bitcoin’s recent rally was a significant inflow into U.S. spot ETFs last week, totaling $2.13 billion — the largest weekly inflow in eight months. However, such a surge in ETF inflows is not always a bullish signal. Historically, significant inflows following lower market participation have often preceded price corrections or smaller net inflows. If ETF demand does not remain strong at the beginning of this week, it could be an early indicator of a potential price correction or consolidation.
Source: SoSoValue
Impact of upcoming options expiry
On Friday, October 25, over $5.5 billion in Bitcoin options will expire, marking the second-largest expiry by open interest to date. A large portion of call volume and open interest is concentrated around the $70,000 strike, which could act as a significant resistance level. If bullish momentum wanes, the price might gravitate toward the max pain level, currently around $64,000. However, if Bitcoin breaks above $70,000, options sellers may need to hedge by purchasing Bitcoin, potentially boosting bullish momentum.
Source: Laevitas.ch
Could a new all-time high be around the corner?
Potential Wave 3 development
Before the recent rally, Bitcoin found support in the 0.5-0.618 Fibonacci retracement zone, a level often associated with the formation of Wave 2 in Elliott Wave Theory. Typically, Wave 3 extends to around 161.8% of Wave 1, targeting around $75,000 in this case. If this pattern plays out, Bitcoin could reach above $80,000 in the coming months.&
However, holding above the 200-day SMA remains key to this bullish outlook. A sustained position above this level would make any short-term correction a healthy pause before resuming upward momentum, while a failure could raise doubts about the rally’s sustainability.
MVRV Z-score signals a possible bull run
The Short-Term Holder (STH) MVRV Z-Score recently moved above 0, indicating that, on average, short-term holders are in profit. This could lead to two outcomes: increased confidence among holders, leading them to keep holding, or profit-taking, which might increase selling pressure. Over the last three months, such situations have often coincided with local price tops, particularly when the price dropped below the STH Realized Price. If Bitcoin manages to stay above $63,200, it could signal further bullish momentum.
Source: Checkonchain
Meanwhile, the Long-Term Holder (LTH) MVRV Z-Score is nearing a break above 0. Historically, this has signaled the start of a prolonged bull run, often leading to a cycle peak. An exclusion was Bitcoin’s rally in early 2024 when the asset price updated its all-time high ahead of halving.&
Source: Checkonchain
Conclusion
Recent developments suggest that Bitcoin may face three possible scenarios in the short term:
- Bearish: A price correction to the 200-day SMA, around $63,400, to test the strength of the uptrend.
- Neutral: Price consolidation in a narrow range, potentially between $66,700 and $70,000, serving as a pause before stronger movement.
- Bullish: A breakout above $70,000, which would likely require a new catalyst since current momentum may not be sufficient.
Given the weakening momentum, the bearish or neutral scenarios appear more likely. However, these movements could still be part of a healthy correction within the broader uptrend. The longer-term outlook remains bullish, with the potential for Bitcoin to reach a new all-time high in the coming months, even if a short-term dip occurs first.
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