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As Bitcoin Soars to Fresh Heights, Some Call a Top

Bitcoin is up almost 150% and has topped $18,000 for the first time in three years. It might seem like the cryptocurrency is headed higher, but there are still plenty of reasons to be bearish that this may be the top.

Greed is running high

Bitcoin received one clear bearish indicator on Thursday when the Crypto Fear & Greed Index reached 94, almost touching the record high of 95, according to Cointelegraph. The index is based on several estimates of investor sentiment and provides a score out of 100 to indicate how oversold or overbought the cryptocurrency markets are. The closer the index reads to 100, the higher the possibility that the market will correct. 

Apparently, the index has successfully called price tops frequently since it was initiated in 2018. The developer of the Crypto Fear & Greed Index explain on their website that behavior in the crypto market is extremely emotional, resulting in fear of missing out or fearful selling, which drives prices. 

The index hit its record high of 95 in June 2019, and Cointelegraph Markets analyst filbfilb tweeted that the structure of this year’s market is “very similar” to last year’s. 

Calls for a bitcoin price correction

Indeed, the higher bitcoin goes, the more calls there are for a correction. CryptoQuant CEO told Cointelegraph that the Exchange Whale Ratio points to growing deposits into exchanges by whales. That could mean selling pressure is right around the corner because when whales deposit bitcoin into exchanges, it usually means they’re preparing to sell and take a profit on their holdings.

Like the Crypto Fear & Greed Index, the Exchange Whale Ratio is also right around a level that has historically resulted in a significant price decrease. In the last few days, the ratio has been above 85%, which means it could be teetering on the edge of a correction. 

When the ratio is below 85%, the chances of the price continuing to climb are high, but when it comes between 85% and 90%, it suggests a correction. Anything above 90% can signal a significant price drop. Once the price starts to fall, it’s anyone’s guess how long the correction will last and how far it will fall.

Bears ponder bitcoin amid the price surge

Aside from the various indicators that are calling for a correction in the near term, some well-known investors have been bearish on bitcoin for some time. For example, as bitcoin remained on track for a new high, crypto bear Ray Dalio of Bridgewater Associates took the time to ponder it in a series of tweets this week. 

He admitted that he might be missing something about bitcoin and would like to be corrected, but he has issues with the cryptocurrency being an effective currency. Dalio noted that bitcoin is not a good medium of exchange because it appears to be too volatile for most merchants to use. 

Dalio also argued that bitcoin isn’t good as a store of wealth because of its volatility and lack of correlation with the prices of what he needs to buy. As a result, he said owning bitcoin doesn’t protect his buying power. He also doubts whether central banks, institutional investors and others would ever purchase mass quantities of bitcoin to hold as a type of reserve asset. 

Short-term concern or long-term worry?

According to Business Insider, so-called “bond king” Jeffrey Gundlach has also been bearish on bitcoin for a while. In an interview with RealVision last month, he said he doesn’t believe in the cryptocurrency. He thinks claims about it being untraceable are a lie, and he doesn’t think it is anonymous. However, Gundlach also said he isn’t a “bitcoin hater.”

Also this week amid bitcoin’s rise, JPMorgan CEO Jamie Dimon said the cryptocurrency is not his “cup of tea.” He has spoken out against bitcoin in the past with even stronger words. This time around he was speaking at the New York Times DealBook Summit on Wednesday. Previously, he went so far as to call bitcoin a “fraud” and said it “isn’t going to work.” He also said if JPMorgan traders were trading cryptocurrency, he would “fire them in a second” because it is against their rules, “they are stupid, and both are dangerous.” For every long-term bitcoin naysayer, there may be 10 bulls, but the recent run on the price recently should have even the biggest bulls concerned about a correction, even if they don’t go so far as to side with the naysayers completely.