The price of Bitcoin settled around $122,000 on Wednesday after a decline of 2.67% the day before.
Profit-taking activities on Bitcoin continue to increase, posing downside risks to Bitcoin.
Traders should be cautious as reports indicate a temporarily inflated market with a high risk of short-term consolidation.
The price of Bitcoin ($BTC ) is settling around $122,000 at the time of writing this report on Wednesday, after a 2.6% drop the previous day, as increasing profit-taking pressure has kept investors cautious. Additionally, the K33 report indicates that the largest cryptocurrency by market capitalization may face short-term consolidation before its next major move.
Bitcoin's decline as holders realize some profits
Bitcoin started the week on a positive note, reaching an all-time high of $126,199 on Monday. However, Bitcoin saw a 2.5% decline on Tuesday, as holders realized some gains. This can be seen from the chart below, where Santiment's realized profit/loss metric showed an increase on Monday and Tuesday for Bitcoin. Furthermore, on Wednesday, the metric recorded a massive rise, the highest since early October, indicating that holders, on average, are selling their holdings at significant profits and increasing selling pressure.
Aside from profit-taking activities, concerns about the prolonged U.S. government shutdown, which has entered its second week, are increasing economic uncertainty and negatively impacting risk assets such as Bitcoin.
Market participants' focus is now shifting to the release of the Federal Open Market Committee (FOMC) meeting minutes, scheduled to be released later on Wednesday, which may bring new volatility to riskier assets such as Bitcoin. Additionally, the appearance of Federal Reserve Chair Jerome Powell on Thursday will be closely monitored for further signals regarding the path of interest rate cuts. This, in turn, will impact the U.S. dollar (USD) and provide a new boost to riskier assets.
On-chain data indicates a temporarily inflated state
The K33 report released on Tuesday highlighted that current conditions indicate a temporarily inflated market with a high risk of short-term consolidation.
The analyst explained that last week saw the strongest accumulation of Bitcoin so far this year, with 63,083 Bitcoin added through ETFs in the United States, CME, and perpetual futures, surpassing the previous record set in May.
"This rise is occurring without a clear macroeconomic catalyst and is driven by a broad long position, as yields have sharply increased in both CME and perpetual futures. Historically, such exposure explosions often coincide with local peaks, and the current setup suggests a temporarily inflated market with a high risk of short-term consolidation," reported the analyst at K33.
A shift in Bitcoin exposure, futures, and ETFs. Source: K33
A QCP Capital analyst reported on Wednesday that the key signal remains: fading U.S. dollar strength, expecting gold to outperform, and treating headline-driven corrections in Bitcoin and risk assets as buying opportunities, while staying informed about tariff volatility and chart gaps in the near term.
Bitcoin Price Outlook: Bitcoin may extend its correction if support at $120,000 is broken
Bitcoin reached its all-time high of $126,199 on Monday after rising more than 10% in the previous week. However, Bitcoin failed to maintain its rise and corrected by 2.67% on Tuesday. At the time of writing this report on Wednesday, Bitcoin is hovering around $122,000.
If Bitcoin continues to correct and closes below $120,000, it may extend the decline towards the next daily support level at $116,000.
The Relative Strength Index (RSI) on the daily chart reads 63 after dropping from overbought conditions on Monday, indicating a potential slowdown in upward momentum and the possibility of short-term consolidation.
The daily chart for the BTC/USDT pair
However, if Bitcoin maintains its upward momentum, it may extend the rise towards its all-time high of $126,199.
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