Analyst: Bitcoin price may soon “fall back” after reaching $18,000

The price of Bitcoin is surging toward $18,000, with excited traders betting that the top digital asset could surpass its 2017 all-time high of $19,763. Unless you’re a short seller, hitting new all-time highs is great. But ideally, for a sustainable uptrend to keep pace, a stair-step uptrend is more favorable than a sudden surge.

In recent weeks, Bitcoin has continued to soar without long periods of consolidation or sharp declines.

BTC/USD daily chart. Source: TradingView.com

The possibility of a rebound is increasing

Anonymous trader “Squeeze” noted that Bitcoin has seen little consolidation since late October, suggesting that this could exhaust the current uptrend’s momentum.

Despite the strong upward momentum of Bitcoin, the price of Bitcoin has also increased nearly sixfold since the March crash. If Bitcoin continues to rise without a major correction, the probability of a major correction in Bitcoin will increase. The trader wrote:

"The consolidation period is getting shorter and shorter, and there are not many pullbacks. The highs and falls will come soon."

Bitcoin consolidation phase and rise Source: Twitter

Peter Brandt, a popular veteran trader who also closely monitors Bitcoin’s price action, made a similar point earlier this week. Brandt noted that in the previous bull run, Bitcoin experienced nine corrections leading up to its all-time high.

In the recent uptrend, at least so far, Bitcoin has experienced two major corrections. Compared with historical uptrends, Bitcoin's corrections have been much smaller. He wrote:

“During the 2015-2017 Bitcoin bull run, Bitcoin experienced 9 major corrections, averaging as follows: 37% decline from high to low. 14 weeks from one high to the next high. Since the early September low, there have been two 10% corrections.”

Since the drop on November 8, the price of Bitcoin has risen from $14,344 to $17,858. Bitcoin has risen by nearly 25% and entered a clear consolidation phase.

Consolidation and occasional pullbacks after rallies are key to maintaining a long-term uptrend as it neutralizes the futures market and reduces the likelihood of a sudden top.

In technical analysis, a pullback refers to a sudden and sharp drop in the price of an asset. For example, after Bitcoin reached its peak in 2017, the price of Bitcoin fell by nearly 70% in the following 52 days.

With Bitcoin’s all-time high near $20,000, traders are expecting a drop before it reaches $20,000. Many analysts appear to be expecting this to happen.

Futures funding rates remain neutral

One variable that could keep gains going in the short term is funding rates, which hover around 0.01% across major futures exchanges.

Futures exchanges in the cryptocurrency market use a mechanism called “funding” to achieve balance between traders.

When most traders in the market are long Bitcoin, the funding rate will turn positive. If this happens, call contract holders or longs must incentivize shorts and vice versa.

Top futures exchanges like Binance Futures have a funding rate of 0.01%, which suggests that the current rally is not overheated.

Traders still expect Bitcoin to eventually retreat as it nears $18,000, while technical analysts note that recent Bitcoin price cycles show that each rally is followed by a shorter period of consolidation.