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In three short months after two flash crashes in early August and September, Bitcoin rose nearly 90%.
The dip on 5 August 2024 forced the coin to as low as $49,000, but since then, Bitcoin has nearly doubled, lifting the crypto market with it.
Of note, the leg up was perpendicular. As traders sought equilibrium after $74,000 was obliterated in early November, prices quickly rose after Donald Trump won the hotly contested presidential elections in the United States.
The breakout above March 2024 might have led to a short squeeze, considering all the dump and expectations of more losses by short sellers after the uneventful price action in early Q3 2024.
Bitcoin Rally And Dip
From the daily chart, the leg up from $74,000 to $85,000 was fast and “violent.” Holders did nothing but saw their gains increase rapidly. Speculators, on the other hand, pushed their leverage higher, maximizing price swings and volatility.
After the “fun,” it looks like Bitcoin is now taking a welcomed breather. The high “octane” rally and frenzy are subsiding, and normalcy is back.
Yesterday, on November 25, Bitcoin corrected after stagnation, falling to as low as $92,600 at some point.
While such corrections could typically spark concern, one analyst, taking to X, thinks this pullback is just one of the many expected health phases in the coin’s long-term growth cycle.
Pointing to market data from CryptoQuant, the analyst said the correction could even form a base for stronger gains in the future.
Understanding The Drop!
Bitcoin is cooling off, printing a double-bar bearish formation in the daily chart, completely wiping out minor gains posted over the weekend.
However, this should be expected.
It comes when the futures market, the analyst explained, is highly leveraged.
As things stand, the spot market is the dominant price driver, while the futures market is straining due to the high leveraging. This state of price action is prove that bulls still have what it takes to push higher despite the recent drop.
Leverage remains at multi-month highs, and the market appears ripe for a deleveraging event.
This flush-out could trigger a cascade of liquidations.
Why The Dip Is Not A Concern?
Although Bitcoin might post more losses today and even this week, there should be no reason for concern.
Market data shows that Bitcoin remains on a solid footing.
For now, the realized profit/loss ratio is high, suggesting that the expected profit-taking could worsen the sell-off in the short term. Usually, the realized profit/loss ratio rises to the current highs when prices are topping. Therefore, looking at history, the cool-off is part of the ebbs and flows of Bitcoin.
Moreover, the coin’s realized volatility is low, dropping from COVID-19 levels. The big boys, including institutions and governments, could consider getting exposure to the asset.
Though the low volatility could keep away speculators (which is good), the involvement of agencies and large corporations could steady prices in the long term.
SosoValue data shows that institutions are buying, looking at inflows to spot Bitcoin ETFs. By November 25, all issuers managed over $102 billion worth of Bitcoin-backed shares.
Even so, considering the price drop yesterday, over $438 million worth of BTC-backed shares were redeemed.
What’s Next For Bitcoin?
Bitcoin might be correcting, but market data shows that the dip won’t be extended.
Smart institutions and companies like MicroStrategy are taking advantage of the low prices to buy.
https://x.com/saylor/status/1861033309934862601
Meanwhile, analysts expect Bitcoin to ease past $100,000, even reaching $120,000 and $150,000 in the coming months.
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Disclaimer: Crypto is a high-risk asset class. This article is provided for informational purposes and does not constitute investment advice. You could lose all of your capital.
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