Bitcoin Just Hit $100K. Is a Crypto Sell-Off Coming Next?

The price of bitcoin broke $100,000 for the first time ever early Thursday morning, setting yet another all-time high in 2024 as the post-election rally for digital assets maintains its momentum.

Bitcoin, the largest cryptocurrency by market cap, is up 50.67% since Election Day, and the current rally — which was initially propelled by Donald Trump's deregulatory pro-crypto platform — continued after the president-elect announced his desire to create a strategic bitcoin reserve.

Bitcoin has since surpassed silver to become the eighth-largest asset in the world, according to crypto news platform Watcher.Guru, and is rapidly approaching a $2 trillion market cap, which would put it on par with Google's parent company, Alphabet, in valuation.

With bitcoin having gained 133% so far this year, some investors may be wondering how much higher it can go before a sell-off would bring prices back down to Earth. While there's no crystal ball indicating when that could occur, examining the crypto market's current drivers as well as bitcoin's historical price action can provide context.

The Trump effect on bitcoin

Bitcoin was already enjoying a strong year before Trump won the presidential election on Nov. 5. However, since the Republican was declared the winner, the crypto market has been surging. In addition to bitcoin's aforementioned gain, ethereum is up 62%, and Elon Musk-endorsed dogecoin is up 180%.

Much of this can be attributed to Trump's increasingly vocal support of crypto — an asset class he once dismissed as a "scam" and "disaster waiting to happen." But the president-elect has changed his tone over the past year, and on Oct. 15, he launched his own token, World Liberty Financial, which had an initial valuation of $1.5 billion.

On the campaign trail, Trump courted crypto enthusiasts by proposing plans to bolster bitcoin mining, which he has likening to a function of domestic manufacturing. He has also pledged to end initiatives like Operation Chokepoint 2.0, which could remove barriers for crypto businesses in accessing banking services, and stated that he intends to defend self-custody rights while opposing central bank digital currencies.

Things are moving quickly. Earlier this month, Trump named crypto fanatic Musk as head of the new Department of Government Efficiency (DOGE). Securities and Exchange Commission Chair Gary Gensler, a notorious crypto critic, announced Thursday his intent to resign on Jan. 20: Trump's inauguration day. And on Nov. 22, Reuters reported that a "slew of crypto companies including Ripple, Kraken and Circle are jostling for a seat on President-elect Donald Trump's promised crypto advisory council, seeking a say in his planned overhaul of U.S. policy."

The combination of an incoming administration that's been clear in its crypto-friendly intentions combined with an already strong year-to-date performance for bitcoin is underscoring the ongoing bull market for digital assets.

What bitcoin's price chart tells us

If history is any indication, bitcoin will likely experience a steep sell-off in the wake of it crossing over $100,000 as both retail and institutional investors look to lock in gains, adding to the expanding list of bitcoin millionaires.

Looking back at bitcoin's last two major run-ups in price — which culminated on Nov. 13, 2021, when it hit a then-record $64,402.50, and on March 13, 2021, when it hit a then-record $61,190.87 — both instances were followed by considerable corrections.

From its then-high on March 13, 2021, a bitcoin sell-off resulted in a 48.46% plunge that saw prices bottom out at $31,539.02 on July 17, 2021, before beginning to climb higher. And from its then-high on Nov. 13, 2021, bitcoin lost 73.94% during a protracted bear market that was referred to as "crypto winter." That sell-off lasted for more than a year before prices bottomed at $16,449.59 on Nov. 26, 2022.

If bitcoin does experience a price reversal after setting this all-time high, it could be even more pronounced as the most recent gains have been parabolic, denoting a rapid and dramatic increase in price over a short period of time.

The Relative Strength Index (RSI) — a momentum indicator used in technical analysis that identifies likely points of reversals based on historical price action — is also suggesting that a steep sell-off may soon follow. The RSI generally plots points from 30 to 70. When the indicator is around 50, it is neutral. When the RSI reading is near or below 30, the equity — be it a stock, exchange-traded fund or crypto — is considered "oversold" and likely to experience a price reversal and head higher.

Alternatively, when the RSI is approaching or above 70, the equity is considered to be "overbought" and likely to see prices fall. Currently, when looking at bitcoin's year-to-date chart — the RSI is reading 72.51, which is firmly in overbought territory and could be indicative of a looming price reversal.

However, with the Trump administration occupying the White House beginning in January, conditions for a continued crypto bull market will be in place. That could blunt an extended price correction for bitcoin.

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