The Bitcoin (BTC) price has seen a strong recovery to $9,887 since mid-March, rising by more than $6,000 within a span of two months. The rapid upsurge was caused in anticipation of the block reward halving that is set to occur on May 12.
The halving will continue to be the main narrative around the Bitcoin price trend throughout the next two years, as it directly affects the supply of BTC. It reduces the rate in which new BTC is mined by half, causing its supply in the market to drop.
While a positive long-term effect of the halving on the Bitcoin price is undoubtable, analysts still anticipate that three main factors Sell Bitcoin to PayPal will cause a drop-off shortly after the halving occurs.
Bitcoin is overbought
The Relative Strength Index (RSI), an indicator that is used to determine whether an asset is oversold or overbought, is flashing highly overbought conditions for Bitcoin.
On the daily chart, the RSI hovers at 79. Any reading above 75 is considered overbought, and below 30 is acknowledged as being oversold.
The last time the RSI was this high was on February 9, when the price of BTC was at $10,100. At the time, BTC rose to as high as $10,500, but ultimately fell to $8,000 within a month.
There are also counterarguments for high RSI levels. Some argue that in an extended Bitcoin to Euro exchange bull market, Bitcoin can remain oversold for longer periods of time than in normal price cycles. Hence, depending on Bitcoin’s price movement, the RSI can act as a positive catalyst for the dominant cryptocurrency.
After the second Bitcoin halving In 2016, the price of BTC immediately dropped and analysts predict that the upcoming halving will see a similar result.
A sell-off following a highly anticipated event typically happens in the cryptocurrency market, where exchange bitcoin to perfect money investors respond with a sell-the-news approach. When over-leveraged investors are forced to lower their positions and the hopium around the event subsides, the Bitcoin price tends to rebound again.
Logan Han, a hedge fund manager and cryptocurrency investor, suggested that the Bitcoin price is likely to react with a sell-off after the halving.