BTC Enters Correction Phase
The price of bitcoin (BTC) is currently undergoing a correction phase after its surge beyond the $44,000 level. According to a report by CryptoQuant, several valuation metrics indicate that BTC’s price has risen too quickly and is due for a correction.
Metrics Signaling Correction
One of the metrics used is CryptoQuant’s Bull-Bear Market Cycle Indicator, which has entered the red zone for the third time this year. In the past, this indicator has signaled a correction in crypto asset prices during similar periods of overheated bull phases.
Another metric is the percentage of Bitcoin supply in profit. On-chain data reveals that 90% of circulating BTC is currently in profit, which historically indicates the start of a price correction.
Selling Pressure from Holders and Miners
The crypto market has experienced selling pressure from both short-term and long-term holders, as well as whales and miners. Short-term holders have been selling their assets at high profit margins, while longer-term holders have also been offloading their BTC as prices surpassed $40,000. Additionally, average dormancy data shows that six-month-old bitcoins were spent before the price decline.
Bitcoin miners have also been selling more coins as BTC surged to $44,000. They have taken advantage of higher prices and sold their assets at an average profit margin of 40%. This increased miner outflow suggests that they are preparing for the upcoming Bitcoin halving event and gathering resources.
Bull Phase Continues
Despite the recent correction, CryptoQuant believes that BTC has transitioned into a bull phase. Although the cryptocurrency has fallen about 10% from its peak, it has seen a 4% spike in the last 24 hours and is currently trading at $42,700.
Improving Liquidity Conditions
In the crypto market, liquidity conditions are improving as the market cap of stablecoins continues to rise. Tether (USDT), the largest stablecoin, has reached a new high with a market cap surpassing $90 billion. The total stablecoin market cap has also increased to $129.19 billion, according to data from DefiLlama.
Hot Take: BTC Correction Expected as Valuation Metrics Signal Overheated Market
The recent correction in the price of bitcoin comes as no surprise, given the valuation metrics indicating an overheated market. With CryptoQuant’s Bull-Bear Market Cycle Indicator entering the red zone for the third time this year and 90% of circulating BTC in profit, it was only a matter of time before a correction occurred. Selling pressure from short-term holders, long-term holders, whales, and miners further contributed to the downward movement in price. However, despite this correction, BTC remains in a bull phase and continues to show resilience. As liquidity conditions improve and stablecoin market caps rise, we can expect bitcoin to regain its upward momentum in the near future.
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