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Highlights
- Bitcoin's price consolidation between $105k and $101k may lead to a crash to $99k or lower.
- Weakening momentum and declining daily active addresses hint at a correction.
- Uncertain macroeconomic conditions and potential decline in Fed rate cut odds add to the bearish outlook.
Over the past 10 days, Bitcoin (BTC) has been moving sideways, consolidating between $105k to $101k. But three recent developments hint BTC’s price may crash lower to $99k or lower.
On May 17, the weekend, BTC trades at $103.3k after dropping 2.52% in the past 24 hours. Ethereum (ETH) and other top cryptocurrencies have also followed Bitcoin’s footsteps and registered a loss.
Here’s Why BTC Price Eyes Crash to $99K or Lower
In short, the reason for a bearish outlook on BTC price is due to Bitcoin’s technicals, macroeconomic uncertainty, and historical returns.
- BTC’s technical analysis shows weakening momentum that hints at a correction.
- Daily Active Addresses (DAA) & New Addresses joining the Bitcoin blockchain have decreased while price continues to ascend, showcasing classic sign of bearish divergence.
- Lastly, the uncertain macroeconomic conditions due to the US Federal Reserve’s policies have stirred the markets. Trump’s trade war has also caused a massive volatility spike in both traditional and crypto markets.
Reason 1: Technicals Hint Weakening Momentum
The ongoing BTC price consolidation is losing steam, leading to a production of lower highs. The Relative Strength Index (RSI), hovering above the overbought zone of 70, is also sliding lower, adding credence to the drop in bullish momentum. Hence, a further consolidation followed by a correction is something that investors can expect.
Key Levels to Watch:
Bitcoin is hovering above the $102k support level, which is the upper limit of the value area formed between December 2024 and February 2025. Auction Market Theory states that an acceptance inside the prior value often leads to a rotation toward the lower limit. Hence the short-term Bitcoin price prediction is bearish with a target of $93k, which is the value area low.
So, from a higher timeframe outlook, a steep crash to $93.1k is likely if BTC price flips $102k. However, as noted in previous articles, Bitcoin’s single print around $99k could see huge demand from dip buyers, enough to potentially halt the correction.
Reason 2: Drop in Addresses & New Investors on Bitcoin Blockchain
Data from Santiment shows declining Daily Active Addresses, hinting that investors are leaving the Bitcoin blockchain. Moreover, the Network Growth (NG) metric that tracks new addresses joining the network has also declined.
Both these indicators’ behavior suggests that investors are fleeing the network and are not interested in the current price levels.
Reason 3: Uncertain Macroeconomic Conditions
Despite a soft April CPI print, the US stock market and cryptocurrencies have failed to reflect the bullish sentiment. On the contrary, investors are uncertain about a Fed rate cut announcement. The CME Fed Watch Tool shows odds of a rate cut at 8.3% and 34.2% in June and July, respectively. Jim Bianco’s research shows that this probability declines as the Fed’s meeting date approaches. This means that the September rate cut odds of 51.5% are likely to decline in the future.
In conclusion, the outlook for Bitcoin looks bearish in the short term, especially with the continued decline in BTC’s 30-day volatility. Investors need to exercise caution as periods of low volatility are often followed by high volatile phases.
Frequently Asked Questions (FAQs)
1. Why is Bitcoin's price potentially heading towards a crash?
2. What are the key levels to watch for Bitcoin's price?
3. How do macroeconomic conditions impact Bitcoin's price?
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