Bitcoin (BTC) has modified loads in 4 years, distancing itself from shady centralized entities like FTX and rising because the plat du jour amongst institutional traders. Nonetheless, this month’s drive again into six-figures amid cooling tariff tensions is presenting numerous warning indicators that seem eerily much 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 thrill was capitalized on by shrewd merchants, who shorted the large information and rode BTC all the way down to an eventual backside at $28,000 simply two months later.
Then, as the complete trade started getting ready for a sustained bear market and even the top of bitcoin (keep in mind the Chinese language mining ban), BTC turned tail and commenced 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 value motion this time round is being accompanied by those self same on-chain metrics telling an analogous story a couple of potential double prime.
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 Might 2025. RSI is an indicator that compares averages positive factors with common losses over a set interval to gauge doubtlessly overbought or oversold circumstances. Bearish divergence is the place RSI is trending to the draw back while value 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 larger 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 often 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 also be diverging from value motion, at the moment Open curiosity 13% decrease than the preliminary drive to $109K in January whereas value 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 value being 6.6% larger.
What does this imply?
The similarities with 2021 are clear nevertheless it’s value noting that the crypto market construction is totally 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 value, the presence of institutional curiosity is way larger on this cycle. There’s additionally the aspect of spot bitcoin ETFs, which permits intuitional traders and corporations to amass BTC in a conventional regulated venue.
As discovered in 2021, on-chain metrics will be an inaccurate measure of forecasting value 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 would additionally grow to be a “promote the information occasion,” during which merchants try to capitalize on emotional shopping for from uninformed retail traders.
What the symptoms do counsel is that while a brand new document excessive may very well be shaped like in 2021, the momentum of this transfer is waning and analysts who’re boldly calling for $150K and even $200K value targets may very well be in for a impolite awakening as soon as the sell-off actually 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 firms and DeFi protocols.
This time round, the market has a number of different components to contemplate if costs start to tumble. Notably, MSTR’s leveraged BTC place, the rising BTC DeFi trade that has $6.3 billon in whole worth locked (TVL), and the billions of frothy {dollars} that bounce across the memecoin ecosystem, which is thought to disproportionately contract throughout occasions of market stress
