Bitcoin’s Recovery Might Be Temporary, Analyst Suggests
After experiencing a decline on March 19, Bitcoin managed to recover on March 20. However, according to on-chain analyst Willy Woo, the cryptocurrency may not see rapid gains in the near future as many expect. Instead, Woo believes that Bitcoin will likely consolidate in the coming days.
SOPR Indicates Profit-Taking and Potential Consolidation
Woo points to several on-chain metrics that provide mixed signals about Bitcoin’s price movement. One of these metrics is the Spent Output Profit Ratio (SOPR), which is used to measure the profitability of Bitcoin transactions. While a high SOPR reading suggests that more Bitcoin is being moved around at a profit, the recent peak in SOPR raises concerns.
According to Woo, the unusually high level at which the SOPR peaked indicates profit-taking. This means that holders are likely selling their Bitcoin at the current price, which could result in a period of sideways consolidation.
Reasons for Optimism Amidst Price Volatility
Despite the potential for consolidation, Woo also highlights some reasons for optimism. Firstly, he notes that the recent dip from the swing high of $73,800 was around 20%, which is more severe compared to previous cycles before halving events. In the last cycle before halving in 2020, the dip was over 30%.
In addition, Woo sees a positive sign in the “Macro risk signal,” which compares inflows to risky assets like Bitcoin and other cryptocurrencies. While this metric is currently rising and bullish, it may cause some investors to panic and sell off their holdings before prices rally to new levels.
Bitcoin Consolidation Could Benefit Altcoins
The potential consolidation of Bitcoin could also have an impact on altcoins and leverage traders. Woo suggests that altcoins may experience a pump in price while Bitcoin consolidates in a technically bullish structure.
However, Woo advises caution for leverage traders, as the leverage ratios on perpetual swap bets have not been reset. This could result in increased volatility and the need for position adjustments.
Bullish Outlook Despite Expected Volatility
While Woo predicts possible choppy price action in April, he remains bullish overall. The recent wave of institutional demand and the upcoming Halving event are expected to drive Bitcoin’s price higher in the coming sessions.
Currently, Bitcoin bulls have managed to reverse the losses from March 19, with the cryptocurrency trading above the 20-day moving average. Optimistic traders are eyeing $73,800 as the short- to medium-term target.
Hot Take: Bitcoin’s Recovery May Be Short-Lived
While Bitcoin has managed to recover from its recent decline, there are indications that its upward momentum may be slowing down. On-chain analyst Willy Woo suggests that profit-taking and potential consolidation could hinder rapid gains in the near future. However, there are reasons for optimism, such as the severity of the recent dip compared to previous cycles and the positive signals from the “Macro risk signal” metric.
Despite expected volatility, Woo remains bullish on Bitcoin’s long-term prospects. Altcoins may also benefit from Bitcoin’s consolidation, but leverage traders should exercise caution. Overall, while short-term fluctuations may occur, many traders are optimistic about Bitcoin’s future performance.
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