Despite Bitcoin reaching close to $45,000 recently, a widely-followed analyst suggests that the cryptocurrency might experience a significant cooldown, with a possible dip to $30,000, based on historical indicators from the Directional Movement Index (DMI).
According to CryptoCon, a respected commentator, Bitcoin could undergo a 30% correction to alleviate “overheated” conditions signaled by the DMI. Despite the recent climb to $45,000, historical patterns point towards a retracement at the beginning of 2024.
CryptoCon, who had been bullish on Bitcoin throughout 2023, highlighted the DMI reaching levels that typically indicate a bearish trend reversal. In a post on X (formerly Twitter), he commented, “I have been bullish on Bitcoin for all of 2023, but data shows us it’s time for a cooldown to start off the New Year, 2024. It’s a battle between reliable long-term data and those who think that this time will be different. I know which side I’m on!”
Comparing current DMI readings to mid-2019 levels, a period when BTC/USD experienced its mid-cycle top, CryptoCon acknowledged the potential for a correction. Back then, the pair dipped by more than half over the following 16 months, though this time may not be as severe. Still, he suggested a potential 30% correction, aligning with historical pullbacks, as indicated by Glassnode’s chart.
CryptoCon added, “A 30% correction from the DMI overheat zone brings us to prices around 30k. And that percentage is much less than in previous examples! The data structure looks just like the example in 2019 with the double peak in red. But I think the drawdown will be far less than 50%, and not take near as long as then.”
In a later update on January 2, CryptoCon acknowledged that Bitcoin might experience more upside before the correction sets in, possibly reaching $48,000. This optimistic scenario aligns with the anticipation surrounding the decision on the United States’ first spot Bitcoin exchange-traded fund (ETF).
As of the current update, BTC/USD is trading around $45,000, with market data indicating some of the highest funding rates seen in over a year. This suggests a potential risk, indicating that traders might be overly confident in expecting sustained higher prices.