Bitcoin Is Heading Towards $25 000

Another week of the new 2021 began with a major selloff of the world's largest cryptocurrency. In just a few days, Bitcoin shed more than 20%, plummeting from $40,000 to a low of $30,305. After a minor consolidation, the price stabilized in the $35,000 area. Such an impressive correction tamped down traders’ enthusiasm, who are now interested to find out only one thing —will the BTC collapse continue?

At the same time, it’s worth noting that this last BTC/USD correction wasn’t something unexpected and inexplicable. On the contrary, any trend in the financial market represents a constant struggle between buyers and sellers, when the initiative is seized by either party from time to time. This price behavior is especially relevant for BTC. The digital coin has shown phenomenal growth in recent weeks and updated its all-time highs, without any correction. In other words, a pullback in the BTC/USD pair was imminent and could commence at any time.

The Crypto Fear & Greed Index is an excellent illustration of the changing market sentiment. The indicator shows how much Bitcoin is overvalued or undervalued at a particular point in time. The index literally shows the level of greed and fear for the BTC/USD pair that prevails in the market at this very moment. When the Crypto Fear & Greed Index shot past 90, it became obvious that market participants “believed” in Bitcoin, or rather in its future growth. However, even the crypto market is designed in such a way that one cannot earn money all the time. As soon as the index reached another extreme, the trend reversed and the clear overbought picture triggered a corrective pullback that could continue until the market reaches a new equilibrium point. As a rule, this happens around 50-60 points. After the recent BTC plunge, which sent the price to the $30,000 region, the Crypto Fear & Greed Index corrected from 95 to 78 points. Based on this, we can assume that Bitcoin’s tailspin may continue and that now is not the best time to open long positions in this asset.

Should we expect Bitcoin to recap its losses and rise to the $50,000 mark? Of course, we should. The cryptocurrency’s growth will be supported by a constant influx of new investments on the one hand and the absence of regulatory risks on the other. Bitcoin is the only cryptocurrency that is not backed by any company, thus, it will not have to face such issues as the XRP, for example. According to Google trends, Bitcoin is now repeating its end of 2017 dynamics, fueled by the news that large banks will continue to enter the cryptocurrency. Morgan Stanley (NYSE:MS) bought an 11% stake in MicroStrategy (NASDAQ:MSTR), which has already invested over $1billion in Bitcoin. That being said, the BTC growth will certainly continue. However, the current picture suggests that there is a risk of another selloff to $25,000 area before growth recommences.