It’s a very exciting time within the cryptocurrency space. Bitcoin has passed the $85,000 threshold, creating a jolt of positive marketing surging $2 trillion with the market supply, investors win. Once as a journalist covering financial markets, I went through the cycle myself. I know what happens next—the exhilarating rise undone by the heart-dropping fall. In a time like this, when the stakes seem very high, your sense of caution is always needed.
The temptations of get-rich-quick schemes are strong, and Bitcoin’s epic run this year has certainly stoked the fires of speculation. That weekly close above $85,000 now becomes a key technical indicator to watch closely for signs of recovery should it hold. It’s an opening to soar much farther than that! All too often, history reminds us that optimism unmoored to reality is a perilous enterprise, usually followed in short order by a harsh retribution.
I think back on the mania of 2021, the unstoppable march to close to $70,000, powered by ETF approvals and institutional adoption. For a long time, it seemed like Bitcoin was untouchable, the chosen one, poised to reshape the entire financial universe. Then the inevitable market correction did hit — a reality check that reminds us all that no amount of innovation can protect an asset from market forces forever.
The Relative Strength Index (RSI) is a killer long term indicator and it’s screaming warning signals. This powerful momentum indicator can signal when assets are overbought or oversold. An RSI value greater than 70 means that Bitcoin is overbought. Escaping Walras’ Law would mean its price has shot up too fast and should go the other way any day now. We definitely need to get above $85K and see some solid momentum above $90K for a confirmed recovery rally. Even accounting for that great point, the current RSI levels overall are a major red flag we can’t overlook.
Now, to be sure, there are bullish arguments that can be made. ETF inflows are on the verge of exploding and Senator Cynthia Lummis’ Bitcoin Act is advancing. Combined, they should outweigh tariff concerns and recession worries, pushing Bitcoin beyond its all-time high. Some forecasters may be dreaming too big as some are actually projecting a crypto winter wave to $109,312.
These rosy scenarios depend on a series of factors coming together just right. Even the slightest disturbance can throw a wrench into the planned, orderly rally. Whether regulatory hurdles, macroeconomic headwinds, or a simple change in investor sentiment, something could spark a big sell-off.
Perhaps the most worrisome thing about all of this is the bubble it could create. But rapid price appreciation along with euphoria and speculative trading are all classic indicators of a market bubble. Bitcoin’s current valuation, which many believe is orders of magnitude above what the asset is actually worth, adds to the worry.
As someone who’s lived through too many boom-and-bust cycles, I know the painful impact of wrecked bubbles. A rapid and severe depreciation in value can financially devastate investors. This undermines their confidence in the marketplace and leaves behind permanent economic wounds. The difficulty of both managing and securing cryptocurrency makes their risk all the more acute. Losing access to your digital wallet can result in losing all of your investment with no possibility of recourse.
Additionally, the large transaction costs and regulatory uncertainty around Bitcoin are still serious obstacles. The absence of investor protections, unlike traditional financial assets, exacerbates this risk.
The crypto market is all about speculation and volatility. In early November 2024, Bitcoin hit $80,000 on Crypto.com. Yet almost immediately, it was hit with volatility that even the most seasoned traders found difficult to navigate. The market's sensitivity to news and events, both real and perceived, can lead to wild price swings that are difficult to predict.
I believe in Bitcoin’s promise to revolutionize finance. As exciting as the current market certainly is, I would encourage those of us seeking to understand it better to proceed with a bit of skepticism. All of that hype at the $85,000 level is forming a bubble of its own that seems ripe to pop just as suddenly.
I am not arguing that investors get out of Bitcoin entirely. I call for restraint. Always do your own research, know the risks associated with investing in crypto, and only invest what you can afford to lose. Avoid drinking the Kool-Aid, and steel yourself for the storms that will come as surely as the sun rises.
Only time will tell what the future holds for Bitcoin. As to whether it will stay on its trajectory upward to ever greater heights, or face a devastating correction is anybody’s guess. One thing is clear: caution is paramount in this volatile market. Investors need to enter these deals with both eyes open, understanding the risks of the market and being ready for any outcome. Treat Bitcoin with the respect it deserves. It’s a potentially revolutionary asset, to be sure, but as with everything new, be smart about it and come with a healthy skepticism.
