Bitcoin’s recent surge back above $100,000, fueled by easing trade tensions, mirrors the 2021 cycle high, raising concerns. In 2021, Bitcoin reached a record high of $65,000 in April, followed by a sharp drop to $28,000, before an unexpected rally to $69,000. Current price action shows unsettling parallels.
Key indicators suggest waning momentum. Weekly RSI displays bearish divergence—three instances since March 2024—where RSI trends down while price trends up, signaling potential overselling. Trading volumes are significantly lower than during the initial move above $100,000, both in crypto and institutional markets. CME BTC futures volume has consistently fallen short of the earlier peak. Open interest, a measure of outstanding futures contracts, is also diverging from price, mirroring the 2021 pattern. Currently, open interest is 13% lower than the January peak, while the price is only 5.8% lower. In 2021, open interest was 15.6% below the initial high, despite a 6.6% price increase.
While institutional involvement is far higher now than in 2021—thanks to corporate Bitcoin acquisitions and the potential for spot Bitcoin ETFs—these on-chain metrics still raise caution. A new record high remains possible, perhaps triggered by a potential U.S. Bitcoin treasury announcement, but this could lead to a “sell the news” event. Analysts predicting prices of $150,000 or $200,000 may be overly optimistic.
A price drop would significantly impact the current market landscape, which differs substantially from 2021. MicroStrategy’s leveraged Bitcoin position, the burgeoning Bitcoin DeFi industry ($6.3 billion TVL), and the volatile memecoin ecosystem pose substantial risks. A market downturn could lead to significant consequences, potentially impacting numerous firms and protocols. The current situation warrants caution despite the apparent parallels with the 2021 cycle.
