Bitcoin’s parabolic rise well above its previous record has caused many to experience a 2017 déjà vu and several analysts are concerned that the market is lagging behind for a considerable correction.
On January 8, the Bitcoin (BTC) price hit a new all-time high of $ 41,940 and this week’s 28% collapse to $ 31,076 caused professional and retail investors to fear that a strong trend reversal was brewing.
Historical Bitcoin data shows that rapid parabolic ascents are generally followed by equally catastrophic corrections, such as that observed after the 2017 bull run. 2018 did not go unnoticed.
Timothy Peterson, global macro investment manager for Cane Island, recently pointed This one:
“Bitcoin risk is approaching 2017 levels. Investors who buy at this price can expect to lose 40% of their investment at some point in the future. However, the typical maximum reduction is 30%, so that risk is only modestly high compared to the average. “
In a private follow-up conversation with Cointelegraph Peterson noted that there remains a short-term bull case for Bitcoin stating:
“For the bitcoin valuation to reach 2017 levels, it would have to be at least $ 80,000. There is a small chance that this will happen, and if it does, it will happen quickly. High prices tend to rise further. “
Burst bubble or lower support retest?
There are some telltale signs that Bitcoin’s rapid gains reflect a manic market on the verge of a correction and the current bull versus bear debate revolves around whether this week’s volatility is a healthy retracement to test lower supports before the price starts. the next bullish move.
LookIntoBitcoin founder and Decentrader analyst Philip Swift recently made the case that Bitcoin’s recenet price action reflected a “necessary setback / slowdown” and he noted that several indicators were flashing red, indicating that the BTC price appreciation rate was reaching extremes.
Swift said:
“The price has now dropped below the x3 multiple, where I hope it will remain for a while. As others have said, the price probably went up to x3 (in addition to x2) because we had a previous craze phase in the cycle versus the last cycle with both retail purchases + institutions. “
Swift’s analysis indicates that BTC tends to trade laterally and rise slowly in the short term, but at a slower rate “as some money / profit turns in altcoins”. Recent price movements in altcoins, especially DeFi-related tokens, indicate that this rotation may already be underway.
BTC bulls are not yet finished
While analysts and chart watchers are asking Bitcoin to take a break, optimistic investors may have indicated that they have different plans. On several occasions this week, the bulls have advocated a new lower support test, buying with each dive and there is also an expectation that the institutional flow to BTC will resume now that the gray scale has reopened its GBTC product family.
A look at the 30-day average daily sentiment score for Bitcoin shows that, despite the decline, the average score has declined only slightly from recent highs and is well above the lows seen during previous bearish cycles.
While few know the exact course of Bitcoin’s price action this weekend, strengthening the fundamentals from a technical perspective, increasing institutional flow and positive announcements by government regulators suggest that the recent declines have been nothing more than corrections that should occur before the Bitcoin gears to reach a new historical record.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you must conduct your own research when making a decision.