Bitfinex Warns of Bitcoin Volatility
Bitfinex has cautioned investors to be careful in their trading strategies as bitcoin (BTC) has entered a higher volatility environment. According to the latest edition of the Bitfinex Alpha report, BTC’s recent climb to the $38,000 range might not be sustained for long, as on-chain metrics suggest that the digital asset could retrace its steps and drop to the $31,000 range.
Investors Urged to Be Cautious
Bitcoin’s surge to the $38,000 level resulted in approximately $491 million in liquidations, the largest since the August 17 flash crash. Bitfinex emphasized the importance of analyzing BTC’s potential next move based on past cycles. The key to understanding BTC’s price movements lies in the Short-Term Holder Realized Price (STH RP), which indicates the average purchase price by investors who have held the asset for 155 days or less.
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The STH RP is currently at $30,380 while bitcoin hovers around the $37,000 range, marking the widest gap between the two metrics since April 10, 2022. Historical cycles indicate that a negative monthly shift in Long-Term Holder Realized Price (LTH RP) suggests long-term holders are liquidating their bitcoin investments.
BTC’s Market Cap Close to $750B
Currently, the monthly positive change in STH RP and negative shift in LTH RP indicate that BTC’s price has reached a local peak and a retraction to test the STH RP level is expected. As it hovers around $30,380, BTC may pull back to the $30,000-$31,000 range. Bitfinex has been discussing the possibility of a new bull market or ending stages of a bear market since December 2022 and throughout BTC’s rise this year.
It is important to be cautious as both STH and LTH levels are dynamic measures. Meanwhile, BTC’s market cap is close to exceeding $750 billion for the first time since April 2022, signifying a significant milestone in its recovery.
Hot Take: Bitfinex’s Cautionary Advice
Bitfinex urges caution as bitcoin enters a more volatile phase. Analysis of on-chain metrics suggests that BTC could retrace its steps from its recent high of $38,000 and fall back to the $31,000 range. The widening gap between Short-Term Holder Realized Price (STH RP) and bitcoin’s current price indicates potential investor profitability concerns. It is crucial for investors to exercise caution and carefully consider their trading strategies during this period of increased volatility.
