Bitcoin's (BTC) price has rebounded by more than 19% three weeks after hitting a two-month low of approximately $56,550, reaching approximately $67,270 on May 20. However, a sharp correction in the coming days is possible based
This resurgence has been chiefly fueled by signs of cooling inflation, which, in turn, has raised bond traders' expectations of an interest rate cut in September instead of November. In addition, a resurgence in spot Bitcoin exchange-traded funds (ETF) inflows has boosted BTC prices.
Bitcoin price could slip below $54,000
Bitcoin’s potential to undergo a sharp correction in the coming days is high, based on its recent price action.
Notably, the BTC/USDpair has been trending inside what appears to be a bull flag pattern since March, when it refreshed its record high to around $73,800. As of May 20, BTC's price was testing the flag's upper trendline for a potential breakout.
However, the breakout attempts lack adequate trading volume, thus increasing BTC's possibilities of undergoing a pullback.
In this case, the next downside target is at the flag’s lower trendline, coinciding with the 200-day exponential moving average (200-day EMA; the blue wave) at around $53,970 by June.
Conversely, a decisive breakout above the flag's upper trendline could have the price rise by as much as the previous uptrend's height, per the rule of technical analysis.
Doing so would send BTC's price toward $84,000 by June, up around 25% from the current price levels.
Tether mints $1 billion to meet potential demand
Last week, Tether (USDT), the world's largest stablecoin, reached a new all-time high market capitalization above $110 billion. This demand for "sideline capital" could potentially catalyze Bitcoin to reach new all-time highs in the coming weeks.
The infusion of new USDT into the market increases overall liquidity, leaving more U.S. dollar-pegged stablecoins available for a potential deployment toward Bitcoin and the rest of the crypto market. For instance, these newly minted USDT played a significant role in Bitcoin’s price surge from $27,000 to $73,000, according to Lookonchain.
This new stablecoin supply, therefore, reduces the possibility of a major Bitcoin crash in the coming weeks and months. However, according to 10x Research, Bitcoin must break decisively above the resistance level of $67,500 to establish new record highs.
Bitcoin NUPL hints cautious upside sentiment
As of May 4, the Bitcoin Net Unrealized Profit/Loss (NUPL) metric has reached 0.54. This indicates that a significant portion of BTC holders are experiencing substantial unrealized gains.
Typically, a NUPL value exceeding 0.5 points to a confident market sentiment, potentially paving the way for further price increases. However, it's important to note that the NUPL is down from its 2024 peak of 0.68, established in March.
A declining NUPL is often seen as a sign of declining euphoria, which typically precedes or coincides with price corrections. As a result of this on-chain signal, Bitcoin's price may see pullbacks in the coming months.