Bitcoin has undergone a steep correction, dropping below an important psychological level, causing liquidations worth $303 million in the past 24 hours, catching traders off guard. However, the long-term outlook shows that BTC is right where it should be. There is a chance for a recovery rally, but investors should not hold their breath.
Bitcoin has entered the weekly Fair Value Gap (FVG), which extends from $20,386 to $17,181, indicating an imbalance created by BTC buyers in early January that led to a 21% return on a weekly candle. When the price shot up, it left a gap untouched by the following candlestick, leaving an imbalance in its wake. Typically, these gaps are filled when the asset is pushed back into it, rebalancing the inefficiency.
Interestingly for Bitcoin, this FVG caused a shift in market structure that favored the bulls, as BTC set a higher high relative to the October 31 swing high at $21,473. Such a development would suggest that the bullish outlook remains on a high timeframe and that the current retracement is a good opportunity to accumulate.
As long as the price remains above the November 2022 swing lows at $15,462, the weekly chart will show a bullish structure. With that in mind, an accumulation between $20,000 and $18,800 seems to be the best way to go.
However, investors must also keep an eye on the weekly Relative Strength Index (RSI), which has slipped below the midpoint after the recent sell-off. If bulls have control, the weekly RSI should climb back above the 50 level and hold.
The recovery of the Bitcoin price will depend on two things: macroeconomic events for non-farm payrolls (NFP) and the consumer price index (CPI), and investors’ ability to accumulate. The macroeconomic events are likely to stir up volatility again, so investors must stay put until after these events. After the CPI announcement on March 14, investors must look for a few things to measure investors’ accumulation capacity.
On-chain signs of a recovery rally include the stablecoin whale accumulation pattern, which shows the raw power of high net worth individuals and if they want to accumulate. The number of whale transactions, which tracks the number of transactions worth $100,000 or more, works as a proxy for these whales’ investment interests. If this indicator shows a peak after a massive drop, it could signal a buying opportunity.
