After hitting a new all-time high (ATH) of $126,199 on Binance, Bitcoin (BTC) is now consolidating in the low $120,000 range. The latest stock market data – such as the Cumulative Volume Delta (CVD) Confirmation Score – suggests that BTC is benefiting from strong underlying demand.
CVD confirmation shows strong demand for Bitcoin
According to a CryptoQuant Quicktake post from Arab Chain, Bitcoin’s CVD confirmation score – a 30-day rolling correlation between Bitcoin’s price and CVD – suggests a strong resynchronization of the trend.
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For the uninitiated, the CVD confirmation score measures the 30-day correlation between the price of Bitcoin and the CVD, which tracks the net difference between buyer buying and selling volumes on exchanges. A high score (above 0.7) indicates that price increases are supported by real buying pressure, while a low or negative score indicates weak or speculative momentum.
The latest data from Binance shows that the CVD confirmation score is currently hovering around 0.8 to 0.9, indicating that the current price increase is largely driven by real taker buying and not a technical upswing or a short squeeze.
Past data also suggests that when this data point remains around 0.7 for an extended period of time, price corrections tend to be relatively shallow and short-lived. This is because new liquidity in the market quickly absorbs any incoming supply of BTC.
The CryptoQuant analyst noted that if the CVD confirmation score continues to hover above 0.7 – coupled with a decisive break above the $124,000 – $126,000 resistance zone – it could be heading for a potential target of as much as $135,000.
However, any negative divergence where the BTC price rises and the CVD confirmation score falls below 0.4 should be seen as a warning sign as it increases the likelihood of distribution or liquidation pressure.
Conversely, the $112,000 – $115,000 and $108,000 – $110,000 stand out as strong support levels for BTC. At these price levels, the CVD confirmation score should remain stable to ensure the uptrend remains intact. Arab Chain added:
The underlying trend is bullish and is supported by real inflows on Binance, the highest volume exchange in the world. Keep an eye on three confirmation signals: CVD confirmation remains high, open interest remains moderate, and funding does not become excessive. Any apparent imbalance between these numbers will be the first warning of a momentum shift.
Is BTC due for a correction?
While the bulls are hoping for an extended rally for BTC, some analysts think are not entirely convinced about the digital assets that will soar to new highs in the short term. This is what crypto analyst ZVN recently said declared that BTC could witness a pullback before the next surge to $150,000.
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This was also the case recently with fellow crypto analyst Dick Dandy predicted that BTC could witness a massive 60% price correction, falling all the way down to $43,900. At the time of writing, BTC is trading at $118,791, down 1.8% in the past 24 hours.
Featured image from Unsplash, charts from CryptoQuant and TradingView.com
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