Bitcoin Could Experience Correction Before Potential Surge to New Highs: Galaxy Digital CEO
Galaxy Digital CEO Mike Novogratz predicts that Bitcoin may undergo a correction before potentially reaching a new all-time high. He anticipates that the cryptocurrency could drop to the mid-$50,000 level before rallying later this year.
Predicted Correction Before Another Rally
Traders have raised concerns about the unsustainable rapid pace of Bitcoinโs recent surge, causing some to expect a price correction. Among them is Mike Novogratz, the CEO of Galaxy Digital. He believes that the cryptocurrency will experience consolidation and correction before embarking on another rally that could lead to record highs. Novogratz foresees Bitcoin falling to the mid-$50,000s before making a new high.
Novogratz stated:
โI wouldnโt be surprised to see some correction and some consolidation, but Iโm very loath to pick a Bitcoin high because I really do believe this is price discovery. A correction would see it fall to the mid-$50,000s before surging to a new high.โ
Bitcoinโs Recent Surge Driven by Spot Bitcoin ETFs
Bitcoin surged 20% within the past week, surpassing the $60,000 mark. This surge was primarily driven by spot Bitcoin ETFs that continue to attract consistent inflows. According to Novogratz, the recently-approved ETFs have propelled Bitcoin into a price discovery phase.
Novogratz explained:
โSo youโre seeing, you know, a step function in new owners of bitcoin, which is driving, I would say, a frenzy and the whole crypto ecosystem. But with that, the market has become too frothy.โ
Bitcoin experienced a 5% increase on Thursday alone, reaching $63,649. The cryptocurrencyโs price movements and recent surge have led to comparisons with the trading environment during its previous all-time high of nearly $69,000 in November 2021. Traders speculate whether this latest rally could mark the beginning of a bull market for the crypto space.
Potential Concerns over Liquidity
Some concerns have arisen regarding the limited supply of Bitcoin available for purchase on the open market. Over 50% of the circulating Bitcoin has remained untouched for more than two years, according to data from Glassnode. However, Stephane Ouellette, the CEO of FRNT Financial, argues that these concerns are exaggerated as short-term holders are starting to offload their positions.
โWe have a long way to go between now and when we get to a full bull market, but it does seem like this concern that the market will break due to a liquidity crisis is not necessarily the case.โ
Furthermore, data from CryptoQuant reveals that the unrealized profit margin of short-term crypto holders is currently at extreme levels. Another potential slowdown indicator is the high cost associated with opening new long positions in Bitcoinโs perpetual futures markets, which have reached their highest levels since April 2021, according to CryptoQuant. Historically, when the cost of entering new long positions becomes excessively high, Bitcoin prices tend to pause or experience a correction.
Hot Take: Prepare for a Potential Correction Before a Glimpse of New Highs
Galaxy Digital CEO Mike Novogratz predicts that Bitcoin may experience a correction before potentially reaching new all-time highs. He expects the cryptocurrency to drop to the mid-$50,000 level before rallying later this year. This projection aligns with concerns surrounding Bitcoinโs rapid surge and unsustainable pace, with traders anticipating a price correction. While Bitcoinโs recent surge is primarily driven by spot Bitcoin ETFs, potential liquidity issues have also surfaced, primarily due to limited supply. However, experts argue that such concerns are exaggerated and that short-term holders are already offloading their positions. As the cost of opening new long positions in Bitcoinโs perpetual futures markets increases, there may be a pause or correction in Bitcoinโs price movement. Traders have drawn comparisons between Bitcoinโs recent price movements and its previous all-time high, speculating whether this rally marks the beginning of a bull market for the crypto industry.
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