Bitcoin price has pulled back after hitting a record high of $126,500 on Monday. This retreat coincided with the sell-off in the stock market and profit-taking among investors who benefited from the recent bull run.
The most likely Bitcoin price forecast is bullish because of the ongoing demand from Wall Street investors, as evidenced by the robust ETF inflows and Bitcoin treasury companies. Bitcoin also has a long track record of success, including its notable rise from below $1 in 2009 to over $120,000 today.
BTC will also benefit from the potential interest rate cuts by the Federal Reserve as the economy slows. Still, two main risks may drag its performance in the coming months.
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Risk 1: Potential AI Bubble Burst
One major external risk that may affect Bitcoin’s performance is the stock market, where AI spending has driven shares to a record high this year.
The market continued rising this year after OpenAI announced a major deal with AMD. It will purchase AMD shares worth billions in exchange for its chips.
Altogether, OpenAI has announced deals worth over a trillion dollars, including a $100 billion partnership with Nvidia and a $10 billion partnership with Broadcom.
The risk, however, is that the market could be in a bubble, which might pop as investors start to question the valuation of these companies and the profitability potential.
Some notable investors, including Orlando Bravo, have warned that the industry is a bubble that will soon pop. He cited the fact that companies like Nvidia, OpenAI, Microsoft, and Oracle were all in a circular investing phase as a risk.
For example, while Oracle announced a backlog of nearly $500 billion in its last report, most of this backlog is attributed to OpenAI. Also, a group of about 5 American hyperscalers accounts for over 50% of Nvidia’s total revenue.
If the AI bubble bursts, it means that even external assets, such as Bitcoin, will be affected.
Risk 2: Bitcoin Price Has Formed a Risky Pattern
The other main risk that the BTC price faces is that it has formed a risky chart pattern on the weekly chart. As the weekly chart shows, it has formed a giant rising wedge pattern. This pattern consists of two ascending and converging trendlines.
The two line are now nearing their confluence, which means that a bearish breakout may be about to happen. It has also formed a bearish divergence pattern, as the Relative Strength Index (RSI) and the MACD have continued to move downwards.
Therefore, these patterns indicate that the Bitcoin price is likely to experience a strong bearish breakout in the coming months. If this happens, it may drop below the support at $100,000.
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