For the first time since mid-December 2017, Bitcoin reached a new all-time high. While institutional investor interest is skyrocketing, a particular technical indicator is pointing to a steep decline before further gains.
Institutional investors can’t get enough
In former times, Bitcoin was considered a speculative financial instrument used by retailers to make quick money. This narrative was observed throughout the 2015-2017 bull run, when prices shot up by nearly 10,000%. During this two-year period, the pioneer crypto currency rose from a low of $200 to a high of nearly $20,000.
Now it seems that the ongoing bull cycle is being driven by institutional investors using Bitcoin as a store of value.
Stanley Druckenmiller, the legendary American hedge fund manager, is one of the many billionaires who have confessed to owning a significant amount of BTC. Druckenmiller believes that this new asset class has better safe-haven properties than gold because it is thinner, less liquid and has a higher beta.
The growing demand for Bitcoin from the major players can also be observed from an on-chain perspective. Since the beginning of the ongoing upward trend in early October, the number of large transactions with a value of $100,000 or more has steadily increased.
On October 11, there were about 9,800 large transactions in the Bitcoin network. Today, this figure stands at around 20,000 large transactions, representing a 105% increase in this short period of time. Such an upward trend is a clear signal that the confidence of institutional investors in BTC is increasing.
Despite the growing demand for the flagship crypto currency, a well-known technical index on Wall Street suggests that a correction is imminent.
Technical analysis: Bitcoin seems ready for correction
The Tom Demark (TD) Sequential Indicator showed a sell signal on the one-month Heikin-Ashi chart of Bitcoin. The bearish formation took the form of a green nine-bar. This type of technical pattern indicates that Bitcoin may be facing a one to four month bar correction before the bull run resumes.
Based on historical data, the TD setup was extremely accurate in predicting local highs of the BTC trend. It even presented a sell signal in December 2017, just before the start of the 2018 bear market, so the current forecast must be taken seriously despite the bullish price movement in recent months.
Several targets can be defined by measuring the Fibonacci retracement indicator from the low in December 2018 of $3,150 to the recent all-time high of $19,837.
Based on this technical indicator, an increase in sell orders by the current price level could push Bitcoin to $16,300. However, if selling pressure is strong enough, prices could fall towards the next critical support level, around $13,500.
Although the TD build-up suggests that Bitcoin is ready to pull out, the recent high of $19,837 must hold to confirm the declining outlook. Failure to do so is likely to lead to a sharp rise in upward pressure, fuelled by the state of FOMO among investors. A breach of this resistance barrier could lead the BTC to target $24,500 or even $30,000.
Important price levels to watch
Given the high level of speculation about Bitcoin, it is not clear when a sharp correction will take place. Back in 2017, when BTC tried to climb above the all-time high of $1,200 in 2013, it briefly broke through this milestone and then nosedived 32%. If history repeats itself, a similar course correction could develop now.
A 30% correction from the recent high of $19,837 could cause the reserve currency to plummet towards $13,000, as mentioned in the previous analysis. However, too many analysts are paying too much attention to this fractal, which diminishes its effectiveness. Therefore, it is critical to wait for a daily candle to close above the overhead resistance as this could help to invalidate the bearish outlook.