In a major milestone, Bitcoin rallied past $63,000 this week before retreating to the press time price of around $62,000. Over the past month, the asset has recorded an impressive 46% gain as it edged closer to surpassing its previous all-time high.
Despite the massive bullish momentum, the chances of correction depict a cautionary tale.
Bullish Rally Pushes BTC in Loss to Historic Lows
The latest surge in the price of the leading crypto asset has propelled a significant number of Bitcoin addresses into profitable territory, marking a historic low for addresses in loss.
Corroborating this trend, CryptQuant’s latest analysis revealed that during bullish phases, the majority of Bitcoin’s circulating supply sits in unrealized profit while losses are minimized. Conversely, during bearish periods, the circulating supply tends to suffer from unrealized losses.
This pattern suggests the possibility of identifying market tops or bottoms, as market behavior often repeats itself, forming recognizable patterns. However, with the indicator currently residing in the extreme region of the distribution, the risk of significant price corrections looms large.
Since the U.S. Securities and Exchange Commission greenlit several spot Bitcoin exchange-traded funds (ETFs) last month, investors have been caught up in a whirlwind of activity. But correction concerns continue to surface.
A similar sentiment was shared by Daniel Yan, co-founder of Singaporean crypto services firm Matrixport, who said that a market correction is imminent and even forecasted a healthy retracement of nearly 15% by the end of April.
Yan highlighted the complexities of the macroeconomic landscape, particularly in March, while referring to notable events such as the United States Federal Reserve’s forthcoming meeting, the Bitcoin halving, and Ethereum’s Dencun upgrade as factors contributing to this cautious outlook.
Mike Novogratz Chimes In
Galaxy Digital CEO Mike Novogratz cautioned Bitcoin investors about a potential drop before rallying to record level. In a recent Bloomberg TV interview, the crypto investor said that Bitcoin might retract to the mid-$50,000 range amid a broader consolidation phase before surging to a new high.
“I wouldn’t be surprised to see some correction and some consolidation, but I’m very loath to pick a Bitcoin high because I really do believe this is price discovery.”
Novogratz noted that the ETFs have attracted additional retail investors, who are engaging in trading with an unsustainable level of leverage. He cautioned that many individuals, particularly millennials and Gen Z traders, who are pursuing high returns could face significant losses.
However, looking ahead, Novogratz believes that the accumulation of wealth from baby boomers investing in these funds will drive Bitcoin to much higher levels over time, potentially surpassing its 2021 peak of approximately $69,000.
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