Is Bitcoin price going to crash again?

Bitcoin (BTC) reached $83,700 during the early hours of March 12, bouncing back from a low of $76,600 on March 11, as market sentiment showed signs of recovery.

The rejection of BTC/USD at the $84,000 mark raises concerns about the potential for further price declines in the coming days.

Weak Demand for Bitcoin Persists

Significant outflows from spot Bitcoin exchange-traded funds (ETFs) have contributed greatly to the price drop, totaling over $1.5 billion in the last two weeks.

Related: What is driving today’s Bitcoin price increase?

At the same time, Bitcoin’s apparent demand remains subdued, suggesting a waning risk appetite among potential investors, as indicated by data from a leading market analysis firm.

Here’s what to note:

• Apparent demand is defined as the difference between production and inventory changes.

• Production refers to the issuance from BTC mining, while inventory is the amount of BTC that has remained inactive for over a year.

• Apparent demand declines when production outpaces the reduction in inventory.

• After a surge from November to December 2024—prompted by President Trump’s victory—apparent demand fell from 279,000 BTC on December 4 to just 10,000 on February 26.

• On February 27, this measure turned negative for the first time since September 2024.

• As of now, it stands at -93,700 BTC.

• If this trend continues, further price drops could follow, similar to what occurred in July 2024.

• The chart below illustrates that on July 27, 2024, apparent demand was at comparable levels before BTC prices plunged an additional 30% to $49,000 on August 5, 2024.

However, it’s important to note that this metric does not always predict future declines. For instance, it was also negative in late May and October 2024, prior to price increases of 7% and 73%, respectively.

Valuation Metrics Suggest a Potential Correction

Data from market tracking platforms indicate that Bitcoin is currently trading 7% above its four-month low of $76,600, reached on March 12.

Despite this recent uptick, various valuation metrics are still exhibiting bearish signals, indicating the possibility of a deeper correction, according to market analysis.

• The Bitcoin bull-bear market cycle indicator shows the “most bearish level” of the current cycle.

• This indicator measures the difference between the P&L Index and its 365-day moving average.

• Values exceeding 0 indicate a bull market, while values below 0 signify a bear market.

• The current reading of -0.067 is the lowest since May 2023, when Bitcoin’s price began a sustained recovery.

• Additionally, the MVRV ratio Z-score has dipped below its 365-day average, signaling a loss of momentum in the upward price trend.

• The MVRV ratio Z-score helps assess whether Bitcoin is overvalued or undervalued.

“Historically, valuation metrics at these levels have indicated either a sharp correction or the onset of a bear market.”

Bear Flag Formation Indicates Possible Drop to $68,400

From a technical standpoint, Bitcoin is currently forming a bearish continuation pattern that suggests a potential correction ahead.

Key notes:

• Bitcoin is within a bear flag pattern, suggesting further downside could occur if key support levels are breached.

• This bear flag formed after Bitcoin fell from $92,000 to a local low of $76,600 between March 6 and 11.

• The consolidation within the bear flag has Bitcoin trading in an ascending parallel channel, with today’s drop testing critical support levels, including the lower boundary of the flag at $82,000.

• A breakdown below this level could lead to another price crash.

• The bear flag’s downside target, based on the previous drop’s height, is around $68,400, indicating a potential 17% decline from the current price.

Market analysts caution that if the support zone between $75,000 and $78,000 fails to hold, Bitcoin could decline even further to $63,000.

This article does not constitute investment advice or recommendations. All investments and trading involve risks, and readers should perform their own due diligence when making decisions.