Bitcoin’s price has been in a strong freefall over the past few weeks, entering a technical bear market. BTC has plunged from the year-to-date high of $126,320 to $95,000 today. So, is it time to buy the BTC dip, or should you just avoid it?
Why the Bitcoin Price Crash is Happening
There are a few reasons the Bitcoin price is crashing. First, the coin has plunged due to ongoing market fear. The Crypto Fear and Greed Index has slipped to the fear zone. It is common for Bitcoin and other cryptocurrencies to crash amid market fear.
Bitcoin price has also plunged as buyers have remained on the sidelines in the past few weeks. Data compiled by Nansen shows that stablecoin balances on exchanges have been in a downward trend, moving from a high of $89 million on November 10 to $87 billion today.
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Third, BTC price has dived as large investors have continued dumping their tokens. Data shows that large holders have dumped over $45 billion in coins in the past few months, leading to more selling pressure.
Additionally, Bitcoin has also plunged as the futures open interest has dropped to $60 billion, down from the year-to-date high of over $94 billion. It is common for Bitcoin and other cryptocurrencies to fall when leverage declines.
Bitcoin has plunged amid ongoing trouble in the digital asset treasury (DAT) industry, where most companies like Strategy, Metaplanet, and MicroCloud Hologram have also fallen. Their purchases have continued to dwindle in the past few months.
Bitcoin Price Technical Analysis: Time to Buy the Dip?
The daily timeframe chart shows that the BTC price has plunged in the past few months, dropping from a high of $126,300 in October to the current $95,000.
It formed a double-top pattern at $124,240 and a neckline at $107,120. The distance between the double-top and the neckline is about 13.6%. Measuring the same distance from the neckline shows that the target is at $92,232.
However, there is a risk that the Bitcoin price has more downside to go now that it has formed a death cross, a pattern in which the 50-day and 200-day Exponential Moving Averages (EMAs) cross.
Therefore, a move below the double-bottom target at $92,230 will signal further downside, potentially to the key support at $74,470, its lowest level in April this year. This target is about 22% below the current level.
Still, history shows that Bitcoin’s price always rebounds after entering a bear market. For example, the coin dropped 31% from its January high to its April low, then jumped to a record high in May.
As such, one way to approach the ongoing Bitcoin price crash is through dollar-cost averaging, which involves buying in small quantities as its price drops.
READ MORE: Will Crypto Recover as Fear and Greed Index Nears Buy Zone?
