Just as Recovery Seemed to Begin, Bitcoin Faces Warning of Drop to $56,000

▲ Bitcoin (BTC) / AI-generated image

Powerful warning signals pointing to a major price correction have emerged from Bitcoin (BTC) technical indicators and on-chain data. As a result, market anxiety is intensifying over the possibility of a سقوط to as low as $56,000.

Bitcoin recently recovered the $68,200 level, staging a short-term relief rally, but a classic bearish reversal pattern—a head and shoulders formation—has appeared on the chart. Notably, while price highs are trending lower, the Relative Strength Index (RSI) is forming higher highs, signaling a bearish divergence and a sharp weakening in buying momentum. This supports the analysis that the current rebound is likely to be temporary.

On-chain data also indicates that Bitcoin’s support base remains extremely fragile. According to the UTXO Realized Price Distribution, approximately 4.5% of the total circulating supply is concentrated in the $65,600 to $66,800 range, just below the current price. If Bitcoin falls beneath this zone, investors seeking to avoid losses could trigger a wave of sell-offs, accelerating the downward momentum.

Risk signals have also emerged in the derivatives market. During Bitcoin’s rebound, open interest increased to $20.71 billion, while funding rates turned positive, indicating that many traders have entered leveraged long positions. If prices reverse downward under these conditions, a long squeeze—forced liquidations of long positions—could occur, potentially leading to cascading liquidations and a sharp market decline.

Institutional investor sentiment remains notably subdued. Spot Bitcoin ETFs have recorded net outflows for five consecutive weeks, showing that institutions are withdrawing funds. Bitcoin is currently trading below the $70,000 level, which corresponds to the monthly volume-weighted average price (VWAP) widely regarded as the average institutional entry price. Without renewed institutional inflows, upward breakout momentum is likely to remain limited, reinforcing the market’s structural weakness.

Bitcoin’s ability to hold its first key support level at $67,300 is expected to be a crucial determinant of its short-term direction. If this support fails and the price breaks below the head-and-shoulders neckline at $60,800, Bitcoin could plunge more than 7.5%, potentially correcting to the $56,000 level. Market participants are maintaining a cautious stance, watching closely whether Bitcoin can decisively reclaim the $70,000 mark and revive institutional buying interest.

Disclaimer: This article is for investment reference purposes only and we are not responsible for any investment losses resulting from its use. The content should be interpreted for informational purposes only.