Bitcoin (BTC)’s extraordinary rally following pro-crypto president-elect Donald Trump’s victory in the US presidential election has seemingly become a bit too ripe for the market to handle.
In other words, the world’s largest cryptocurrency is in reversal mode following last week’s all-time high.
Although the bitcoin bulls failed to breach $100,000, the BTC/USD pair topped out at a meaty $99,600 on Friday- a price point only the most bullish of crypto analysts expected to see in 2024.
Since then, bitcoin has seen a steep retraction, with 5% wiped from its spot price on Monday alone.
At the time of writing, the BTC/USD pair was swapping at around $92,300, or 7.3% below Friday’s ATH.
Profit taking has undoubtedly played into this retraction given that, with the ‘Trump trade’ lighting a fire under bitcoin, the cryptocurrency achieved a 130% year-to-date gain at its peak.
Spot-bitcoin exchange-traded fund data shows a $435 million outflow from institutional-grade funds yesterday following multi-billion-dollar inflows in the preceding week.
Depending on the direction of the market in the coming days, bitcoin could therefore be preparing to exit the banana zone.
The what zone?
Bitcoin analyst Raoul Pal coined the term ‘banana zone’ to describe a phase in the bitcoin market characterised by rapid and exuberant price increases, often leading to new all-time highs.
When using one’s imagination, one can see that bitcoin’s latest rally shares the physical attributes of a banana, or perhaps a candy cane (since the season is approaching) when looking at the candlestick chart.
Bitcoin’s high-potassium eight-hour chart – Credit: Binance
Of course, bananas have a frustratingly short shelf life, as bitcoin rallies often do.
Price trends over the past couple of days suggest that the rally may also be approaching its expiration date.
However, as in most instances, reduced selling pressure from bitcoin miners, lower ETF outflows and news cycle tailwinds all played a part in bitcoin’s sharp November rally.
If these fundamentals remain intact, bitcoin could stave off further near-term losses. Elsewise, bitcoin could be taking the highway out of the banana zone (for now).