The crypto market’s bullish momentum appears to be faltering, with on-chain analysts and market indicators suggesting a potential return to bearish conditions for Bitcoin and other digital assets. Despite the recent euphoria surrounding Bitcoin’s record-breaking rally, several factors are now raising concerns about a potential correction.
TLDR
- On-chain analysts and market indicators suggest a potential return to bearish conditions for Bitcoin, with a decline below the $58,900 Short-Term Holder support level potentially invalidating bullish theses.
- Analyst Will Woo warns that Bitcoin’s Network Value to Transactions (NVT) ratio suggests the price could be overvalued, and CoinDesk’s Bitcoin Trend Indicator (BTI) has flipped to neutral from bullish, signaling a weakening of upside momentum.
- Analyst “Cold Blooded Shiller” predicts a 30% Bitcoin correction to around $51,000, which could send altcoins into an even deeper freefall.
- Analyst Markus Thielen, who predicted Bitcoin’s recent rally, has turned bearish on risk assets like stocks and crypto, citing rising Treasury yields and dwindling odds of Fed rate cuts.
- Flows into the U.S.-listed spot BTC ETFs have dried up, potentially indicating waning demand and contributing to a potential correction.
One of the key warning signs comes from on-chain analyst Will Woo, who has cautioned that a move back to a bear market is possible if Bitcoin’s price declines below the $58,900 Short-Term Holder support level. This level represents a crucial threshold, and a breach could invalidate bullish theses and trigger a broader sell-off.
Here's how the markets look to me.
$58.9k STH support, if this breaks we move to a bear market.
CVD selloff has peaked, so a phase of "up" next. CVD measures market orders (impatient buy/sells).
Longer term: still weeks away from a proper bullish environment. pic.twitter.com/NxVwSA4KtT
— Willy Woo (@woonomic) April 15, 2024
Woo’s concerns are further reinforced by the liquidation heatmap, which indicates that Bitcoin might move toward $66,638, potentially leading to the liquidation of $7.18 million worth of contracts. If BTC drops further to $64,580, open positions worth $29.17 million could be wiped out on Binance alone, exacerbating the bearish momentum.
Adding to the bearish sentiment, Bitcoin’s Network Value to Transactions (NVT) ratio has moved higher, suggesting that the price could be overvalued for the current market condition. If the NVT ratio remains elevated, it could signal a potential correction in Bitcoin’s price.
CoinDesk’s Bitcoin Trend Indicator (BTI), which communicates the direction and strength of Bitcoin’s price trends, has flipped from bullish to neutral, signaling a weakening of upside momentum. Ether’s trend indicator has also hit neutral, indicating a potential shift in market sentiment across the broader crypto landscape.
Prominent analyst “Cold Blooded Shiller” has taken a bearish stance, predicting a 30% Bitcoin correction to around $51,000. Such a significant retracement could have ripple effects across the altcoin market, potentially sending other cryptocurrencies into an even deeper freefall.
Shiller’s prediction is supported by historical market cycles, which have seen corrections of more than 30% during previous bull runs. For instance, in 2021, Bitcoin experienced a 25% correction early in the cycle and a 53% pullback later that year.
Adding to the bearish narrative is the perspective of Markus Thielen, the founder of 10X Research and the analyst who accurately predicted Bitcoin’s bottom in November 2022 and the recent pre-halving surge to record highs. Thielen has turned bearish on risk assets, including technology stocks and cryptocurrencies, citing the unexpected and persistent inflation, rising Treasury yields, and dwindling odds of Fed rate cuts as the primary triggers for a potential price correction.
.@10x_Research's Markus Thielen, who called $BTC's bottom in November 2022 and the recent pre-halving surge, has become bearish on the crypto market and tech stocks. Reports @godbole17.https://t.co/Urgyd7w2ML
— CoinDesk (@CoinDesk) April 16, 2024
The hawkish repricing of Fed rate expectations, driven by sticky U.S. inflation and a resilient labor market and economy, has lifted the 10-year Treasury yield to its highest level since November 2023. This sharp rise in the so-called risk-free rate has dented the appeal of investing in high-risk/high-return assets like technology stocks and cryptocurrencies.
Thielen notes that inflows into the recently launched U.S.-listed spot BTC exchange-traded funds (ETFs) have dried up, potentially indicating waning demand and contributing to a potential correction. After an initial surge of inflows following the ETFs’ launch, the demand has faded this month, with the 5-day average of net inflows dropping to zero.
While some observers expect the correction to gather pace once the hype surrounding the Bitcoin network’s quadrennial mining reward halving on April 20 fades, others remain optimistic about the long-term prospects of the crypto market.
Analysts like “Checkmatey” from Glassnode suggest that the market does not appear “top heavy,” and the Bitcoin Fear and Greed Index remains in the green zone, indicating that it may be too early to call a bear market based on overall sentiment.
