Bitcoin's recent price dip to $103,300 was likely due to investor caution ahead of the FOMC decision.
Technical analysis shows that Bitcoin is close to a strong support zone between $102,000 and $104,000.
Long-term Bitcoin holders are not selling, in a show of strong bullish sentiment despite profit-taking from mid-term holders.
The positive Coinbase Premium Index shows that there is steady spot demand for Bitcoin from U.S. investors.
On-chain metrics like the MVRV Z-score indicate that Bitcoin is still undervalued and could be gearing up for an 18-25% rally towards $130,000 by Q2's end.
Bitcoin’s price recently dipped to around $103,300 as investors braced for the upcoming FOMC decision on interest rates.
While this short-term correction has been a major source of stress for many investors, several technical and on-chain indicators show that Bitcoin might be in for a powerful rebound soon.
The cryptocurrency could even be on its way towards a 25% rally to new all time highs if historical trends play out.
The price drop between Monday and Tuesday appears to have been driven by investor caution ahead of the Federal Open Market Committee’s (FOMC) rate announcement.
This meeting was scheduled for Wednesday, with the interest rate decision historically a volatility trigger for many financial markets.
The interest rate decisions, combined with the geopolitical tensions from the ongoing war between Israel and Iran, have increased the risk-off sentiment.
The risk aversion from investors was especially evident in the $434 million worth of Bitcoin futures liquidated over the past 24 hours according to data from Coinglass.
However, it isn’t all doom and gloom, because analysts believe that this pullback is a necessary breather for Bitcoin before the next leg up.
From a technical standpoint, Bitcoin seems to be nearing a major support zone between $102,000 and $104,000.
This range is backed by a historical order block, which is an area where institutional buying was especially strong.
These factors tend to attract buying interest and act as a launchpad for rebounds.
Adding more weight to the bullishness is the Bollinger Bands indicator on the daily charts.
The bands appear to be compressing, which is a classic sign that a large price move is on its way.
Bitcoin’s compressing Bollinger bands
The middle band, which currently sits near the $106,000 zone has served as a dynamic resistance during past consolidations.
A break out above this level, especially if $106,748, could validate a mean reversion rally toward $112,000.
However, investors should be aware that there is a catch. A clean break below $100,000 will likely invalidate the ongoing bullish setup and would pull Bitcoin back down to around $98,000:
Which is a very important psychological support level.
While short-term traders are trimming their exposure, long-term Bitcoin investors appear to be calmer.
For example, data from Glassnode shows that mid-term holders, (or holders who have held Bitcoin for six to twelve months) have been actively taking profits.
This cohort of investors have realized around $904 million in gains just this past Monday.
These investors made up 83% of the total realized gains that day.
In contrast, the long-term holders (LTHs), or investors who have held their Bitcoin for more than a year have not joined the selling spree.
According to insights from Bitcoin researcher Axel Adler Jr., these investors appear to be sitting tight, which is a great sign for the Bitcoin bulls.
The continued restraint from the LTH cohort, combined with the profit-taking by mid-term holders, shows that the market dynamics are healthy.
It shows that investors are rebalancing their portfolios, rather than panicking.
Another encouraging sign is the Coinbase Premium Index. Think of this metric as a comparison of Bitcoin’s price on U.S.-based Coinbase to that of other exchanges like Binance.
When the index is positive, shows that there is strong buying interest from American investors.
So far in June, the Coinbase Premium has remained in positive territory. This indicates that spot demand is steady in the US.
The Coinbase premium is in positive territory
While this demand hasn’t yet translated into a price surge, it provides a solid foundation for future rallies.
Several on-chain metrics are also flashing bullish signals.
One of the most reliable is the Market Value to Realized Value (MVRV) Z-score, which shows whether Bitcoin is over- or under-valued based on historical norms.
At the time of writing, the MVRV score shows that BTC is still strongly undervalued, and therefore has plenty of room to rally.
When combined, these indicators have come before rallies between 18% to 25% within six to eight weeks if history is any indication.
Judging by this, Bitcoin could climb towards $130,000 before the end of the second quarter.
Overall, there's still a risk of deeper losses if Bitcoin fails to hold its ground above $100,000.
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