Bitcoin surged to a 16-month trading high on Wednesday as the pioneer cryptocurrency finally broke across $13,000.
Bitcoin Breaches Yearly Highs, But for How Long?
The top crypto then blew past the psychological $13,000 level following the news that PayPal would let users in the US buy and sell top cryptocurrencies. The managing director of eToro US, Guy Hirsch, told Crypto Briefing:
“[PayPal] saw the appetite of millennials to own this asset class, with some estimates putting bitcoin adoption in the U.S. at 20%-50% by 2030, up from a recent estimate of just 5% today, if it will follow the patterns of internet adoption. The success of their US rival, CashApp, serves as an indication that there is a lot of growth in offering crypto on payment apps.”
As BTC consolidates around the psychological $13,000 level after posting an intraday gain of 8% on Wednesday, an important technical Indicator is beginning to signal potential near-term trend exhaustion.
The Relative Strength Index (RSI) on the daily time frame has now reached 80, marking its highest level since August this year. This signal confirms that Bitcoin has now moved into overbought territory.
Additionally, the RSI indicator shows that Bitcoin is now trading in its second most overbought conditions of the year, even surpassing the March 2020 reading.
Traders use the RSI indicator to gauge bullish or bearish momentum in trends as well as overbought or oversold conditions.
The current daily chart may indicate diminishing chances of further buy interest above the $13,000 level as the RSI trades above 80 percent.
A short-term price correction is likely and would send BTC to the $12,300 to $12,000 support area before continuing to the $13,500 or $14,000 level. Meanwhile, institutional investors continue to show their confidence in Bitcoin, meaning that we will likely see investors buy up the dip leading into the US election.
A recent spike in exchange inflow data shows a diminishing interest in buying even though prices continue to rise. This may also imply that as prices rise, investors may be taking profits and selling.
Data from the crypto behavioral analytics platform Santiment also shows exchange balances spiking into negative territory, clearly highlighting an imbalance of withdrawals and deposits.
Analyzing the holders’ distribution combined balances, a drop in balance percentage may be signaling emerging selling pressure in the short-term. Accounts holding 100 – 1,000 coins are leading in diminishing percentages, followed by accounts holding 1,000 – 10,000 coins.
However, accounts holding 100,000 – 1,000,000 coins have a percentage increase, reflecting corporate buying interests in the long-term.
Ultimately, Bitcoin traders may be provided with a better entry point over the coming days if short-term profit-taking kicks in, and BTC begins to unwind from overbought conditions.