Bitcoin’s rally towards $20,000 from around $14,000 has been quite a simple one with very little barriers or resistance levels along the way. The coin has managed to smash $1,000 brackets with ease as it now looks to challenge $19,000.
The big barrier on the horizon is the previous high of $20,000 which was breached in 2017. However, before that level is reached many analysts are wondering if there will be a correction before then or if the coin can continue growing up and beyond the last all time high.
There are metrics that sem to sugges that a pull back is quite likely, however, when it comes is less certain. Will it before Bitcoin breaks its all time high or will the coin correct aftwards?
Several on-chain data points, namely the Spent Output Profit Ratio (SOPR) indicator, stablecoin inflows, stacked sell orders at $19,000, and the Crypto and Fear Index are all pointing to a likely correction.
The SOPR indicator essentially gauges how profitable Bitcoin holders are at the moment. When the SOPR is high, BTC is at risk of a profit-taking pullback since traders tend to sell when they are in profit.
In the past several days, the SOPR indicator has reached a level that previously led the price of Bitcoin to correct such as in late 2018 and summer 2019.
Rafael Schultz-Kraft, the chief technical officer at Glassnode, said:
“Adjusted SOPR (hourly, 7d MA) as high as it hasn’t been since July 2019. Correction incoming?”
Renato Shirakashi, the creator of the SOPR indicator, said: “People, in general, are much more comfortable selling when they are in profit. In a bull market, when SOPR falls below 1, people would sell at a loss, and thus be reluctant to do so. This pushes the supply down significantly, which in turn puts an upward pressure on the price, which increases.”
Exchange order books also show that the $19,000 level has become an important resistance area. There are significant sell orders across Bitfinex, Bitstamp, Binance, and Coinbase near $19,000, which might prevent the continuation of a rally.
Another possible factor that could trigger a short-term pullback is the Crypto Fear and Greed index. The index is still at dangerously high levels, which raises the probability of a correction.