Bitcoin in Freefall: Should You Buy Now?
Bitcoin is experiencing a significant drop in value, with the price plunging by more than 5% in recent trading sessions and breaking the $60,000 mark. This psychological round number has been a critical level to monitor in the past few days, as it follows the gains made over the weekend.
Despite the ongoing decline and relentless selling pressure, one analyst believes that now is the perfect time to accumulate Bitcoin. In a post on X, the analyst argues that Bitcoin is on the verge of entering the “Spring” phase within the Wyckoff re-accumulation model.
The Wyckoff model is a popular technical analysis tool used by traders to identify potential price movements based on price and volume patterns. Among the different phases outlined by Wyckoff, the “Spring” stage is closely watched by most traders. When prices “spring” higher during this phase, it often results in a breakout from the current range, accompanied by rising trading volume.
By analyzing the daily Bitcoin chart, it is clear that prices have been consolidating recently. The main support level has been around the lows of May and June 2024. After breaking below $57,000, prices dropped to around $56,500 in May. On the upper end, resistance can be found between $72,000 and the highs of March 2024.
Bitcoin is currently retesting the primary support level, as the price briefly dipped below $60,000 on July 4 and reached as low as $56,900. According to the Wyckoff model, this indicates that prices are primed for the spring phase, and this prediction holds, especially if there is no confirmation of the recent losses.
However, not everyone shares the analyst’s optimism. On-chain analyst Willy Woo suggests that the current sell-off is primarily driven by miner capitulation. Looking at the Bitcoin Hash Ribbons, it appears that weak miners are being culled from the market, causing the drop in price.
Following the April 20 Halving, the Bitcoin network automatically reduced BTC rewards by half to 3.125 BTC. This change added further pressure on miners, who need to invest capital in purchasing equipment and operating efficiently. With falling revenue, only the most efficient miners can maintain profitability.
Miners who are unable to upgrade their equipment are therefore forced to exit the scene, as they have no chance of consistently winning block rewards. On-chain data over the past eight months reveals that miners have been offloading BTC, contradicting the uptrend seen in Q1 2024 and exacerbating the correction that began in April.
Despite the miner capitulation, long-term holders such as institutions and whale investors have not been selling since mid-January 2024. The approval of the first Bitcoin exchange-traded fund (ETF) by the United States Securities and Exchange Commission (SEC) likely contributed to this trend. This is evident from the near all-time high of the “illiquid supply” of Bitcoin, which represents the number of coins that have remained untouched for over two years.
In conclusion, while Bitcoin is currently experiencing a decline, some analysts believe that this is an opportune time to buy. However, it is essential to consider multiple factors, including the ongoing miner capitulation, before making any investment decisions.