Bitcoin
Bitcoin May Be Headed for ‘Summer 2021’-Style Correction, Data Shows
Bitcoin isn’t expected to retest its record high until later this year, but data suggests that this correction could get uglier before a recovery begins — similar to how the cryptocurrency fared between two all-time highs in 2021. One bitcoin valuation indicator, CryptoQuant’s Bitcoin Profit and Loss Index, is currently hovering around its own 365-day moving average. This key threshold helps traders determine whether bitcoin is in a bull or bear market. Historically, a crossover of the index to the downside has marked major corrections, including the one between May and July 2021 and, in the same year, between November and December 2021. At the same time, however, traders’ margins have turned extremely negative, which could be seen as a potential sign of a bottom. “Bitcoin is at a level where a local bottom could form or a major ‘summer 2021’-style correction could occur,” said Julio Moreno, head of research at CryptoQuant. “Traders’ unrealized margins are now at -17%, the most negative since shortly after the FTX exchange collapse in November 2022,” he added. “Prices typically bottom out when traders’ margins reach extremely negative levels, as seen currently.” Bitcoin is currently retesting key support at $57,000 for the third day after falling below that level last week. The price of the flagship cryptocurrency has been on a tear since March, when it hit a record high of over $73,000 and quickly corrected. Since then, the cryptocurrency has struggled to return to those highs. Even with the calm in prices, demand for bitcoin has been on an upward trend since May, based on the growing amount of whales holding the cryptocurrency. However, Bitcoin’s network activity shows that the token still has some headwinds. “Stablecoin liquidity is not yet accelerating, a necessary condition for a price rally,” Moreno said. “While there is some positive movement in the stablecoin market through [USD Coin]the lack of corresponding growth in USDT [Tether] market capitalization may delay or diminish the potential for a significant rally in the price of bitcoin. In addition, medium and large-scale bitcoin miners are still selling a portion of their assets.”