Bitcoin (BTC) received a substantial boost this week as US inflation levels for February were in line with market expectations. On March 14, the BTC/USD pair reached a 2023 high of $26,550 after the news.
But while macro conditions may currently favor risk-on buyers, certain chain and market indicators point to a potential correction in the near term.
BTC flows back to exchanges as price rises
On March 13, Glassnode’s exchange flow data recorded the most significant inflow to exchanges since May 2022. This means more supply on exchanges and potentially more selling pressure.
The Coin Days Destroyed indicator, which measures Bitcoin’s time-weighted transfers, is also showing a small spike, indicating that old hands are moving coins. Indicators could signal long-term holders booking profits, which may lead to a correction.
Bitcoin Funding Rates, RSI Jump
Furthermore, the funding rate of Bitcoin perpetual trades is also rising with the latest print of the consumer price index. In other words, more traders are betting higher with leveraged positions, which increases the risk of a correction.
The strong price move has also seen a significant rise in the Relative Strength Index (RSI), an indicator of technical momentum, reading as high as 82. This means that BTC/USD is generally considered “overbought” in the short term.
BTC vs USD painting a bearish pattern
The BTC price is currently forming a widening wedge pattern, which represents the highest level of volatility. Both buyers and sellers are pushing the price beyond support and resistance levels, and reversals are coming quickly.
Buyers failed to break out of the pattern on March 14 and now face resistance at its top of $26,700. At the same time, there is a chance that the price will correct towards the bottom of the pattern, around $19,500, in the coming days.
Conversely, if the Bitcoin price breaks above the upper trend line, the bulls are likely to accumulate to push the price towards $30,000. There are potentially welcome signs for bulls that this could happen, namely in the BTC futures and options markets.
As Cointelegraph reported, there is still room to run as the indicators have yet to hit previous highs.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making a decision.
