Bitcoin’s Price Correction Possibility And Market Sentiments Analysis
Despite a strong rebound following a weekend drop to $61,000, analysts at CryptoQuant are suggesting that Bitcoin’s price may be gearing up for another correction. In a recent community “quicktake,” GAAH, a Bitcoin and Ethereum trader, highlighted concerns that the current bullish market sentiment might be overheating, particularly based on data from the perpetual futures market.
Is Bitcoin Showing Signs of Overheating?
GAAH pointed out that the average 30-day funding rates for Bitcoin remain elevated even after the recent price dip. These rates are similar to those seen during Bitcoin’s all-time high in 2021, which now acts as a significant resistance level for the digital asset.
- The price of Bitcoin is currently moving within a defined channel with a 20% expansion/retraction range, providing an ideal setup for institutional players to establish large positions.
“The price is in a defined channel with around 20% expansion/retraction, an ideal scenario for large players to set up large positions,” wrote GAAH. The last time Bitcoin’s funding rates were in such a substantial bearish position was in late 2022 when the price was significantly lower than it is currently. Although the asset has undergone several brief corrections of approximately 20% since then, it has not experienced a funding premium as it does now.
- The rapid ascent of Bitcoin has prompted many retail investors to start cashing out their profits.
- The Spent Output Profit Ratio (SOPR) for short-term holders reached “extreme greed” levels in March but has now retreated toward a more neutral stance.
“Historically, when there are significant retail profit-taking movements, it often signals a potential market top,” the analyst added. “Following the recent sharp price declines, there has been a notable outflow of profits by these holders.”
Identifying the Next Market Bottom
James Check, a lead analyst at Glassnode, also commented on the SOPR metric, suggesting that its recent drop below a 1.0 ratio is a positive development for bullish investors. According to Check, short-term holders are currently experiencing losses compared to long-term holders, indicating the need for a market shakeout to strengthen the price trajectory.
“SOPR is a metric that attracts contrarian investors,” Check advised. “Keep an eye on the retest of the 1.0 level – it should break above it without facing resistance.”
The recent bitcoin crash, which saw the digital asset lose value and trigger $700 million in liquidations within 24 hours, has been linked to escalating geopolitical tensions between Iran and Israel.
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