Bitcoin is currently experiencing one of the largest declines since the beginning of the year, having lost about 15% in just one week and falling below $86,000. However, this reaction is not unprecedented in the history of cryptocurrency. Ki Young Ju, head of the analytics platform CryptoQuant, encourages investors to remain calm, pointing out that a 30% correction is a typical occurrence within a bull market.
Historical data supports this perspective. In 2021, Bitcoin experienced a dip of 53% but subsequently reached a new high above $69,000. Similar patterns were observed in 2017 and 2013.
Moreover, during every bull market cycle, there are usually two to three corrections in the range of 20% to 30% before the market resumes its upward trajectory. According to estimates from Glassnode, the current correction is the third-deepest of this cycle, trailing only the drops seen in April and August 2023.
The Fear and Greed Index: A Buy Signal?
A significant indicator of market sentiment is the Fear and Greed Index, which has plummeted to 10 points — the lowest level since June 2022. Contrary to typical fears, such low readings often indicate that the market may have hit a bottom.
Experts confirm that when fear levels are high, the likelihood of a swift recovery increases. Analyst CryptoQuant noted that the MVRV ratio for short-term holders has fallen below 1, a threshold that has historically preceded growth in past market cycles.
Additionally, data from Glassnode reveals that the percentage of Bitcoin supply currently in profit has declined to 64%, further signaling that the asset may be oversold.
Why is Bitcoin Falling: Panic or Fundamental Reasons?*
The recent cryptocurrency crash coincided with several significant developments. Geopolitical tensions between the U.S. and its trading partners have escalated due to new sanctions, leading to a capital flight toward safer assets.
At the same time, Bitcoin exchange-traded funds (ETFs) experienced a record outflow of $938 million in just 24 hours, the largest since these instruments were launched. Compounding this issue was a hack of the Bybit exchange, which resulted in the loss of $1.5 billion in cryptocurrencies, marking it as the largest cyberattack since 2022.
Despite these troubling events, most factors appear to be short-term in nature. A more crucial indicator is the behavior of large investors, often referred to as "whales." According to Santiment, wallets holding more than 0.1% of the total Bitcoin volume have added $1.28 billion to their balances in recent weeks, despite the price decline.
Additionally, Glassnode reports that long-term holders continue to accumulate Bitcoin, indicating their strong confidence in its growth prospects moving forward.
Whales Tend to Buy When the Crowd Sells
History shows that major players usually do not panic during market downturns. In 2020 and 2021, increased activity from whales during bearish phases preceded a significant rally in Bitcoin. If this pattern holds true again, the market could recover as soon as the upcoming weeks.
Network data supports this observation: over the last 10 days, the total amount of Bitcoin held in large investors' wallets has increased by 15,000 coins. This represents one of the largest inflows since the beginning of the year, indicating a trend of accumulation in anticipation of future growth. Additionally, analysts from CryptoQuant have noted a substantial decrease in Bitcoin reserves on exchanges, which is another bullish signal that points to positive long-term sentiment in the market.
Support Levels and Development Scenarios
Analysts are closely monitoring key price levels for Bitcoin. One important level is $95,000, which is seen as a significant zone for institutional investors. Another crucial level is $89,000, identified as a short-term support level. If there is a deeper correction, the price could potentially drop to the range of $70,000 to $71,000.
Arthur Hayes, the co-founder of BitMEX, believes that Bitcoin may fall to around $70,000 before finding stability. However, in the long term, most analysts are optimistic about Bitcoin's future. Experts at Bernstein predict that Bitcoin could rise to $150,000 by the end of 2025, despite the current market volatility.
What's Next?
The cryptocurrency market is currently under pressure, but historical patterns and whale activity suggest a potential for a quick recovery. Periods of panic often present buying opportunities, and this correction could serve as another test of Bitcoin's resilience.
Technical indicators, investor sentiment, and whale activity are pointing towards an inflection point in the market. Nonetheless, the key factor will be Bitcoin's ability to maintain a price above $70,000 and reclaim levels above $92,000 in the coming weeks.
Volatility is a fundamental aspect of the cryptocurrency market. For those who remain calm and stick to their strategy, this correction might not pose a threat but rather serve as an opportunity to invest before the next bull run.
If macroeconomic factors and demand from institutional investors remain supportive, a recovery could potentially begin as early as the second quarter of 2025.
