Bitcoin dominance signals overheating – Which ‘dip’ should you target?

• Bitcoin dominance has reached a local high, warning investors of a potential market overheating. 
• THIS highlights the next best “dip” opportunity.

Two days ago, Bitcoin [BTC] dominance surged to an impressive 57%, following a daily gain of over 5% that pushed BTC above the $66K mark – a level it hadn’t breached in more than 150 days.

Now trading at $67,350, Bitcoin has risen over 10% in just one week. This rapid ascent has led analysts at AMBCrypto to speculate whether the market is nearing an overextension.

If this is the case, a pullback to a local low could occur before BTC attempts to retest its all-time high.

High bitcoin dominance signals overheating

In the past week, daily gains exceeding 2% have helped Bitcoin recover from its $60K slump, confirming the level as a new support. 

Additionally, the surge was reinforced by a rising RSI, indicating strong momentum. Trade volume also spiked to a new local high, signaling increased support from retail investors.

As a result, Bitcoin dominance also climbed to a new high. However, this bullish momentum has pushed BTC into “greed” territory, hinting at potential signs of overheating in the market.

Source : BGeometrics

Historically, a shift into greed often coincides with the phase in a cycle where Bitcoin hits a market top, frequently leading to a subsequent price crash.

At this stage, many traders exit, doubling down on their gains, while new buyers hesitate, fearing the inevitable correction. 

Therefore, these traders usually wait for a dip-buying opportunity, capitalizing on the market bottom when Bitcoin dominance resurges.

Currently, with Bitcoin dominance at a new high and other signals pointing to a market top, Bitcoin may be primed for a correction.

This correction could shake out weaker hands, leaving fresh buyers to take advantage of a potential dip.

Bitcoin could retrace to a local low

Bitcoin previously faced rejection at $64K, which must be converted into support to signal the potential dip. This scenario unfolds when new interest perceives this price range as an attractive entry point.

Additionally, as BTC becomes more vulnerable to speculative swings, the likelihood of increased short positions in futures trading rises, with traders targeting $64K as the next dip.

This situation further reinforces the idea that BTC might be awaiting a correction before attempting to test its ATH.

Source : CryptoQuant

Furthermore, a prominent analyst has also cautioned investors as volatility has shifted into negative territory, influenced by the surge in Bitcoin dominance. 

Currently, the price fluctuates between $68.4K and $66.7K, while Open Interest on top exchanges has risen to $20.3B, making BTC even more vulnerable to sudden price swings.

Read Bitcoin’s [BTC] Price Prediction 2024–2025

Overall, the high Bitcoin dominance signals a market overextension, backed by other variables. The rapid ascent to $67K has pushed the market into greed, suggesting that the current price represents a market top. 

While AMBCrypto analysis suggests that $64K is the next target for a potential local low, this presents the best dip-buying opportunity.