Bitcoin, the undisputed king of cryptocurrencies, faces a challenge as a critical moment approaches. After an excellent period in the first half of 2024, breaking the key barrier of $71,000, digital gold has retreated, currently hovering around the key support zone at $61,000. This recent decline has sparked debate among analysts, with some sticking to a bullish long-term outlook and others warning of potential headwinds.

Rainbow whispers: a chance for golden shopping or fool’s gold?

One of the factors that makes some bulls bullish is Bitcoin rainbow chart, a popular tool that analyzes price movements on a logarithmic scale. This chart currently positions Bitcoin in the “Buy” zone, suggesting there is plenty of room for growth before reaching a top.

Additionally, historical price cycles, particularly those following the halving (in which the number of Bitcoin rewarded miners is halved), point to a potential high price point around September-October 2025. This bullish timeline translates to a potential price target of 260 000 USD or even higher according to some analysts.

However, not everyone is convinced by the charm of Rainbow. Critics point out that the chart is a historical indicator and past performance does not guarantee future results. The recent decline in the Coinbase Premium Index pours frosty water on the parade of optimists.

This index reflects the price difference between Bitcoin listed on the US-based Coinbase exchange and international markets. A negative index, as can be seen currently, suggests waning interest of investors from the US, a significant market segment.

Investors are nervous and the number of open positions is decreasing

Another cause for concern is the palpable fear and caution of investors. Recent price declines have shaken confidence, with many people taking a “wait and see” approach. These sentiments are reflected in A pointed decline “Open Interest”, an indicator that tracks the total value of outstanding futures contracts.

As investors are hesitant to take long positions on Bitcoin due to the recent crisis, Open Interest has dropped significantly, indicating a potential reduction in market share.

However, some analysts consider this decline necessary adjustment. They argue that an overheated futures market fueled by excessive leverage could lead to unsustainable bubbles. They believe the current decline is eliminating these over-indebted players, paving the way for a more stable, long-term growth trajectory for Bitcoin.

Will Bitcoin have a tough time?

The future of Bitcoin remains shrouded in some uncertainty. While the potential for significant growth based on historical trends and the Rainbow Chart is undeniable, short-term investor sentiment and sinking US market share cannot be ignored.

The coming months will be crucial in determining whether Bitcoin can weather the current storm and resume growth, or whether it will succumb to bear pressure.

Featured image from Shutterstock, chart from TradingView