Bitcoin (BTC) has modified lots in 4 years, distancing itself from shady centralized entities like FTX and rising because the plat du jour amongst institutional traders. Nevertheless, this month’s drive again into six-figures amid cooling tariff tensions is presenting quite a lot of warning indicators that seem eerily just like the 2021 cycle excessive.
In 2021, bitcoin made an historic document excessive in April of $65,000, coinciding with a flurry of exercise from Michael Saylor’s (then-named) MicroStrategy and the IPO of Coinbase (COIN). The joy was capitalized on by shrewd merchants, who shorted the massive information and rode BTC all the way down to an eventual backside at $28,000 simply two months later.
Then, as your entire trade started getting ready for a sustained bear market and even the tip of bitcoin (keep in mind the Chinese language mining ban), BTC turned tail and started a rally that didn’t cease for 4 months. This relentless surge to the upside resulted in a brand new document excessive of $69,000, regardless of all on-chain metrics pointing in the direction of a bearish consequence.
Ominously, the present worth motion this time round is being accompanied by those self same on-chain metrics telling an identical story a few potential double high.
A deeper dive
The primary of these metrics is weekly RSI, which is exhibiting three strikes of bearish divergence from March 2024, December 2024 and Could 2025. RSI is an indicator that compares averages positive factors with common losses over a set interval to gauge probably overbought or oversold situations. Bearish divergence is the place RSI is trending to the draw back while worth is trending to the upside.
This, coupled with buying and selling volumes which might be decrease in comparison with the preliminary transfer above $100K, means that the momentum of this swing increased is dwindling. Volumes are down throughout each crypto and institutional venues, with quantity on CME BTC futures failing to surpass 35,000 contracts throughout three of the earlier 4 weeks. The preliminary transfer noticed volumes usually exceed 65,000 contracts, hitting greater than 85,000 on three events. One contract on the CME is value 5 bitcoin ($514,000).
Like in 2021, open curiosity can be diverging from worth motion, presently Open curiosity 13% decrease than the preliminary drive to $109K in January whereas worth is simply 5.8% decrease. 4 years in the past when bitcoin hit $69,000, open curiosity was 15.6% decrease than the preliminary $65,000 excessive regardless of the worth being 6.6% increased.
What does this imply?
The similarities with 2021 are clear but it surely’s value noting that the crypto market construction is fully completely different than 4 years in the past. Largely due to Michael Saylor’s Technique and a rising variety of company copycats ramping up BTC acquisitions at any price, the presence of institutional curiosity is way increased on this cycle. There may be additionally the component of spot bitcoin ETFs, which permits intuitional traders and corporations to amass BTC in a standard regulated venue.
As realized in 2021, on-chain metrics will be an inaccurate measure of forecasting worth motion. It’s possible that BTC breaks a brand new document excessive after Trump inevitably reveals particulars of a U.S. bitcoin treasury, however that might additionally turn into a “promote the information occasion,” wherein merchants try to capitalize on emotional shopping for from uninformed retail traders.
What the symptoms do recommend is that while a brand new document excessive could possibly be fashioned like in 2021, the momentum of this transfer is waning and analysts who’re boldly calling for $150K and even $200K worth targets could possibly be in for a impolite awakening as soon as the sell-off really begins. Bitcoin entered greater than a one-year bear market on the finish of 2021, leading to substantial layoffs throughout the trade and the implosion of a number of buying and selling corporations, centralized lending corporations and DeFi protocols.
This time round, the market has a number of different components to think about if costs start to tumble. Notably, MSTR’s leveraged BTC place, the rising BTC DeFi trade that has $6.3 billon in complete worth locked (TVL), and the billions of frothy {dollars} that bounce across the memecoin ecosystem, which is thought to disproportionately contract throughout instances of market strain
