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Bitcoin price has nosedived and entered a technical correction a few days after it surged to a record high.
Bitcoin (BTC), which started the week by surging to a record high of $108,250, has erased most of the gains made this month. It has dropped by 13% from the year-to-date high, entering a local correction. Here are four reasons Bitcoin prices are likely to bounce back and retest the all-time high.
Bitcoin price corrections are not new
The first main reason why the price of BTC will rebound is that the ongoing pullback, which we predicted, is not new. Bitcoin often retreats sharply after rising to a crucial resistance level.
The long-term chart below shows that Bitcoin jumped to $19,778 in December 2017 and then reversed by 84%. It then dropped by 55% after hitting a high of $64,647 in April 2021. Most recently, Bitcoin peaked at $73,885 in March and then crashed by 33% through August.
A strong rebound will likely follow this retreat because BTC still has strong fundamentals. Mining output has fallen since the last halving event, while the amount of Bitcoin in exchanges has continued to drop. Similarly, spot Bitcoin ETFs have attracted over $34 billion in assets, a trend that is expected to continue, especially from institutional investors.
Bitcoin’s MVRV score is still low
Another reason Bitcoin prices may rebound is that the popular market value to realized value score is still lower than during historical corrections. The MVRV-Z score is calculated by subtracting the realized market cap from the circulating market cap and then dividing it by the standard deviation.
According to CoinGlass, Bitcoin’s MVRV score peaked at 2.89 earlier this week. Bitcoin had a score of 3.05 during the bear market in March this year. It also had a score of 3.21 in January 2022’s correction and 5.25 in March 2021. This suggests the coin has more upside potential once the panic selling subsides.
Bitcoin whale accumulation is going on
large Bitcoin holders are still accumulating coins, and hopes of a strategic reserve are rising. MicroStrategy has added more BTC to its portfolio and now holds over 439,000 coins. Marathon Digital, the largest Bitcoin miner, holds over 44,300 coins, while Riot Platforms and Hut 8 Mining have also added thousands of coins.
After observing MicroStrategy’s success, more companies are likely to purchase Bitcoins. Over the past four years, MicroStrategy has transformed from a fledgling technology company into an $80 billion firm.
Additionally, discussions about creating a strategic Bitcoin reserve, especially by Donald Trump, have gained traction. In a recent note, Bitwise noted that more countries could follow suit as the U.S. public debt has surged to over $36.4 trillion.
Bitcoin price has bullish technicals
Finally, Bitcoin price has formed strong bullish technical patterns when viewed from a broader perspective. The weekly chart shows that the coin formed a cup pattern between 2021 and March this year. It then formed a handle between March and October, followed by a strong comeback.
Bitcoin has rallied in most weeks since then, and it is often normal for an asset in an uptrend to pause temporarily. Bitcoin’s target in this bull run is $122,000, which was determined by measuring the depth of the cup at 76%. Adding 76% to the cup’s upper side gives a target of $122,000.
This article first appeared at crypto.news
