Correction 40% $BTC ‌ Could Still Be Worse: 4 Reasons Why

Bitcoin Price
BTCUSD
currently around US$68,500 after dropping about 40% from the mid-January high of US$98,000, and the price rally from the US$60,000 low in February is beginning to show signs of fatigue.

The upward channel formed after the sharp decline may look like a recovery. However, the presence of hidden bearish divergence on RSI, decreasing holder confidence, diminishing short-term holder losses, and a still hopeful liquidation map all point in the same direction.

Hidden Divergence Appears Within the Uptrend Channel

Bitcoin has been trading within an ascending parallel channel on the daily chart since early February, a pattern that formed after nearly a 40% decline from US$98,000 to US$60,000. The upward channel that appears after a sharp correction often results in a continuation pattern, meaning this consolidation phase is likely to end with a price decline rather than an increase.

The Relative Strength Index (RSI), a momentum oscillator, is currently forming a hidden bearish divergence on the daily timeframe. From February 2 to March 25, the price made lower highs while RSI made higher highs. This hidden bearish divergence indicates that the broader downtrend is likely to resume despite the price recovery.

Similar divergences also occurred from February 2 to March 4. After that signal was confirmed, BTC's price corrected by up to 11% over the following days. The latest divergence was confirmed on March 25, and since then, Bitcoin has experienced a decline.

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The lower trendline of the channel is also not far away. If a daily close occurs below that level, the uptrend channel structure could break, confirming a bearish outlook. However, RSI signals alone are not enough to determine whether this correction will be deep enough to reach the channel floor. On-chain data about market confidence provides a more complete picture.

Confidence Begins to Fade While Short-Term Losses Remain Small

The net holder position change metric for Bitcoin, which tracks 30-day accumulation by wallets holding BTC for more than 155 days, peaked at 46,462 BTC on March 15. But by March 26, that number had fallen to 35,278 BTC, a drop of about 24%.

Although this figure slightly increased since March 24, the overall trend since mid-March remains downward. Medium-term holders, often called the backbone of market confidence, are reducing their accumulation even as Bitcoin remains within the uptrend channel. This behavior suggests they are not confident that the rebound has enough momentum for further gains.

Short-term holder behavior adds another potential risk. The net unrealized profit/loss (NUPL) indicator for short-term holders, which measures overall wallet profitability for those holding BTC less than 155 days, is now at -0.21. This places the NUPL value in the capitulation zone.

However, when Bitcoin hit US$62,800 in early February, the short-term NUPL fell to -0.47, much deeper into capitulation territory. Currently, with a NUPL of -0.21 despite the price rising slightly to US$68,500, short-term holders are experiencing much smaller losses than at the February lows. If confidence continues to weaken and the uptrend channel breaks, short-term holders might see this lack of support as a reason to sell, accelerating the decline.

On-chain data reveals a market where confidence is gradually waning. Meanwhile, the derivatives market shows whether traders are already anticipating this possibility or still caught in the wrong position.

Bitcoin Price Faces Long Liquidation Wall at US$64,000

The Gate BTC/USDT perpetual liquidation map for active positions over 30 days shows a market still full of hope. The total cumulative long leverage liquidations reach US$4.21 billion, while short leverage liquidations are at US$4.13 billion. Although the situation appears balanced, the large long leverage in a volatile market poses risks, making it the fourth reason why a deeper decline could still happen.

Despite nearly 40% correction and a current pullback, most leverage positions remain bullish.

The densest cluster for long liquidations is at US$64,100, where the long leverage accumulation reaches US$3.55 billion. This means about 84% of all open long leverage liquidations will be triggered at or above this price level.

Movement toward US$64,100 (zone 64,000) also aligns with the 0.618 Fibonacci retracement level. This area is a key technical and derivatives level.

For the current structure, the nearest critical level is at US$68,700. BTC is testing this level now. If it fails to hold above it, the price could fall toward US$66,400, close to the lower trendline of the uptrend channel.

If the channel breaks, US$64,100 becomes the next main target. A decline there would liquidate most of the long leverage, potentially triggering a chain reaction that pushes BTC down to US$60,900 or even US$56,800, which would worsen the previously highlighted 40% decline.

On the upside, BTC needs to break back above US$71,500 to ease short-term bearish pressure. Bullish momentum will only re-emerge if the price surpasses US$76,100.

A daily close below US$66,400 would break the uptrend channel and expose total long liquidations of US$3.55 billion at US$64,100. However, reclaiming US$71,500 could delay the bearish outlook and keep the rebound possibility open.