Crypto Daily: BTC Skyrockets—But Where Might It Fall Back To?

 

Bitcoin’s bullish breakout from its flag pattern has been nothing short of explosive. After climbing past its previous all-time high of $112,000, the leading cryptocurrency has surged to a peak of $118,400. With momentum seemingly on its side, many are speculating that we could see even higher levels before the weekend wraps up. Some analysts are eyeing the $130,000 mark as a potential near-term target.

However, while the current trend remains strong, it's crucial to remember that markets rarely move in a straight line. Bitcoin may well have more room to run, but a correction or consolidation is inevitable at some stage. Understanding where that pullback might go can help traders stay ahead of the curve.

S&P 500’s Role in the Bigger Picture

Interestingly, Bitcoin’s rally is coinciding with bullish signals from the traditional markets. The S&P 500, which experienced a significant dip due to the earlier Trump-era tariffs, has since staged a remarkable V-shaped recovery. It now appears poised to re-enter the long-term ascending channel that has defined its trajectory since early 2023. Historically, when the S&P performs well, Bitcoin tends to follow suit, benefiting from broader investor optimism and risk-on sentiment.

Short-Term Cooldown Likely

Despite the current bullish sentiment, a short-term pause in Bitcoin’s momentum has already started to show. After reaching the $118,000+ level, BTC has seen a modest retracement into the $117,000 zone. While this looks like a healthy breather rather than a reversal, it serves as a reminder that upward moves often come with volatility.

Importantly, the Relative Strength Index (RSI) on the daily chart has just entered overbought territory, sitting above 70.00. For the bulls to remain in full control, this RSI line needs to push beyond 78.60. If not, the risk of a bearish divergence increases, suggesting potential exhaustion in the rally.

Key Downside Levels to Watch

For traders keeping a cautious eye on potential retracements, the Fibonacci extension levels offer a valuable roadmap. Thus far, the 0.236 Fib level is acting as solid support, helping to hold the recent gains. However, should the market turn downward more sharply, the 0.618 level becomes a key area of interest. Not only does this level represent a deeper, but still technically healthy, retracement—it also aligns with the upper boundary of the original bull flag. This dual confluence could offer a strong support base.

Looking at the weekly timeframe, the situation gets a bit more complex. The RSI is fast approaching a descending trendline that has historically acted as resistance. Should BTC fail to break above this trendline—or fail to push beyond 88.40 on the RSI—it could reinforce the bearish divergence narrative. A failure here could signal that a broader correction is on the horizon.

Conclusion

While Bitcoin is enjoying an impressive rally, caution remains warranted. The momentum may carry it higher, potentially toward $130,000, especially if the S&P 500 continues to support risk assets. Still, overbought indicators and looming technical resistance suggest that a pullback—possibly to the 0.618 Fib level—could be on the cards. Traders would be wise to stay agile in the face of rapid moves and watch both crypto and traditional markets for signs of what comes next.