Bitcoin is going through another major correction. What are the preconditions for its continuation?
It seems that Bitcoin and the digital asset market as a whole are once again experiencing a major correction, which means that it is unlikely to be worth waiting for their local highs to be updated in the near future. This conclusion was made by an anonymous analyst under the pseudonym Avocado_onchain, who published his own research on the CryptoQuant platform. According to him, buyers of BTC over the past six months including now are selling the cryptocurrency in the negative. Such dynamics resembles the behaviour of the market in mid-2019. Then the Bitcoin cycle was approaching its maximum, followed by a sharp collapse of the main cryptocurrency.
Bitcoin is indeed going through another correction, which gained momentum tonight. This is clearly visible on the hourly chart of the first cryptocurrency. Its local low from this morning was $55,606.
Hourly chart of the Bitcoin BTC exchange rate
The rest of the coins from the top of the market capitalisation ranking also issued a drawdown on the scale of the day and week.
The largest cryptocurrencies by market capitalisation
One of the key reasons for the market collapse was the large-scale outflow of funds from spot Bitcoin-ETFs in the US. Over the past 24 hours, net outflows from them totalled $287.78 million – and this is the largest minus figure since May 2024.
Capital inflows and outflows from spot Bitcoin-ETFs in the US
Efirium-based instruments also recorded net outflows. It reached 47.4 million.
Capital inflows and outflows from spot Efirium-ETFs in the US
Against this backdrop, the sentiment of Bitcoin investors is described as fear. Moreover, it is relevant for all the mentioned time periods.
Bitcoin investors’ fear and greed index score
What will happen to the price of Bitcoin?
The spike in the number of unspent transaction exits (UTXOs) up to and including six months old reflects the excitement that accompanied the formation of Bitcoin’s all-time high in March of this year. Here’s an analyst’s rejoinder on the matter, as quoted by Cointelegraph.
These are new investors who entered the market most likely around March of this year, when Bitcoin’s price was at its peak. The decline in the share of such UTXOs suggests that buyers have either left the market – including due to losses amid BTC stagnation – or have continued to hold the coins and moved into the group of long-term investors.
Recall, UTXO is a kind of "residuals" of cryptocurrency, which the wallet user receives from each transaction. UTXOs play an important role in tracking financial flows on the blockchain. Read more about this topic in our previous article.
A graph of the age of UTXOs in Bitcoin, which speaks volumes about investor behaviour
In the chart above, similar UTXO levels were seen in 2019, when Bitcoin hit a local high. It then took the market almost 500 days to break the record price set back in 2017. Here’s an analyst quote.
A similar pattern emerged in 2019 as halving approached. Bitcoin took about 490 days to hit a new all-time high after that – of course, taking into account the impact of the COVID-19 pandemic.
It's important to note that Bitcoin's halving, which saw the reward per block drop from 12.5 to 6.25 BTC, took place in May 2020. In the same timeframe, financial markets went through periods of collapse and panic amid the coronavirus. In general, though, the expert's point of view is that a larger continuation of the bullrun in the coin industry will take place later, and the current growth cycle is far from over.
Buying cryptocurrencies by investors
To remedy the situation could be new investors or players who will be buying Bitcoin for the first time at all. They form the base during bullrun pullbacks.
That is, the appearance of representatives of this category in the market would help to buy out the excess supply of BTC, which would stabilise the situation with digital assets.
A more positive forecast was shared by analysts of QCP Capital. Although they also expect Bitcoin correction, according to experts, it will be short-term.
In general, BTC supposedly should begin to grow as early as October. Here is a quote on the matter, which is cited by The Block.
October is characterised by the strongest bullish seasonality. Bitcoin has posted positive returns and an average gain of 22.9 percent in eight of the last nine Octobers.
Bitcoin returns by month
Experts noted that September is usually a month of high bear activity, not only for cryptocurrencies but for all asset classes. Therefore, they don’t expect to see an intensification of what is happening in the next few weeks.
Bonds have declined in eight of the last ten Septembers, and gold has declined every year since 2017 in September.
If this seasonal trend repeats itself this year, the strategically correct decision would be to accumulate Bitcoin during the September correction and take profits in October or near the end of the year, experts say. However, a similar scenario in the markets is not guaranteed by anything. It can only be caused by the behaviour of investors, who will count on a market crash in September and carry out the corresponding sale operations, thus essentially making the correction scenario real.
Cryptocurrency trader
At the same time, derivatives traders are actively opening new positions in line with seasonal trends. In particular, experts noted significant volumes of purchases of call option contracts with a strike price of $80 thousand, which expire in December.
This indicates positive investor sentiment, which allows BTC to reach a new historical maximum rate at the end of the year.
As a result, analysts are betting that the large-scale growth of the crypto market in the spring of 2024 was a consequence of the listing of spot Bitcoin-ETFs in the US, which attracted billions of investor dollars. However, this is not a full-fledged component of the industry's normal growth cycle. If the bullrun situation repeats itself, the industry's further jump will take place later.
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