As Bitcoin (BTC) struggles to maintain its footing above the psychologically significant $100,000 level, three key indicators suggest that the leading cryptocurrency could be at risk of a deeper correction, potentially falling below $90,000 in the near term.
Traders Seek Protection with Put Options
The first bearish signal comes from the options market, where traders appear to be hedging their positions by purchasing protective put options. According to data from Amberdata, the 25-delta risk reversal, which measures the cost of out-of-the-money (OTM) put options relative to OTM call options, has turned negative for the first time in a month.
This shift in sentiment suggests that traders are growing increasingly cautious about Bitcoin’s near-term price prospects and are willing to pay a premium for downside protection. The negative risk reversal reading follows Monday’s 5% price drop, which may have prompted sophisticated traders to prepare for an extension of the decline.
Coinbase Premium Evaporates
The second indicator pointing to a potential Bitcoin price dip is the disappearance of the Coinbase premium. This premium, which represents the difference in Bitcoin prices on Coinbase compared to offshore exchanges like Binance, has been a reliable gauge of U.S. institutional demand for the cryptocurrency.
During Bitcoin’s recent surge from $70,000 to $99,500 following the U.S. elections, the Coinbase premium was a consistent bullish factor. However, the premium has now turned into a discount, suggesting that the once-robust stateside demand for BTC has weakened considerably.
RSI Divergence Hints at Weakening Momentum
The third and final bearish signal comes from the daily chart, where the Relative Strength Index (RSI) has formed a divergence with the price action. While Bitcoin managed to tap a new high above $99,000 on Friday, the RSI failed to confirm the move, creating a bearish divergence.
This divergence indicates that the bullish momentum behind Bitcoin’s recent price gains may be waning, increasing the likelihood of a corrective pullback. Intraday charts suggest that BTC could find support between $87,000 and $88,000 if the decline accelerates, although long-term technical studies remain bullish overall.
Conclusion: Bitcoin Bulls Face Uphill Battle
As Bitcoin grapples with the $100,000 resistance level, the combination of bearish options market sentiment, weakening U.S. institutional demand, and a potentially exhausted rally on the daily chart suggests that the cryptocurrency could be vulnerable to a dip below $90,000 in the coming days or weeks.
However, it is essential to note that Bitcoin’s long-term technical outlook remains bullish, and any near-term correction could ultimately prove to be a buying opportunity for patient investors. As always, market participants should monitor key support levels and adjust their strategies accordingly, remaining vigilant for any further shifts in sentiment or momentum.
