Bitcoin (BTC) Price Correction: 4 Reasons Why the BTC Rally Is Not Over

Bitcoin (BTC) has erased most of the gains made this month after surging to a record high of $108,250. It has dropped by 13% from the year-to-date high, entering a local correction.

Bitcoin (BTC) price has dropped sharply this week after surging to a record high of $108,250 on Monday. The coin has erased most of the gains made this month and is now down 13% from the year-to-date high, having entered a local correction.

However, several fundamental and technical factors indicate that Bitcoin’s ongoing pullback could be short-lived and that the coin is likely to bounce back and retest the all-time high. Here are four reasons why.

Bitcoin price corrections are not new, and the ongoing pullback is predicted. BTC price often posts a sharp retreat after rising to a crucial resistance level.

The long-term chart below shows that Bitcoin soared to $19,778 in December 2017 and then crashed by 84%. It then dropped by 55% after hitting a high of $64,647 in April 2021. Most recently, Bitcoin peaked at $73,885 in March and then crashed by 33% through August.

A strong rebound will follow this retreat because BTC still has strong fundamentals. Mining output has fallen since the last halving event, while the amount of Bitcoin in exchanges has continued to drop.

Similarly, spot Bitcoin ETFs have attracted over $34 billion in assets, a trend that is expected to continue, especially from institutional investors.

Another reason Bitcoin prices may rebound is that the popular market value to realized value (MVRV) score is still lower than during historical corrections. The MVRV-Z score is calculated by subtracting the realized market cap from the circulating market cap and then dividing it by the standard deviation.

Higher MVRV-Z scores indicate that an asset is overheated and could be due for a correction. As shown in the chart below, Bitcoin’s MVRV score peaked at 2.89 earlier this week, which is still lower than the levels seen during the bear market March this year (3.05), January 2022’s correction (3.21), and March 2021 (5.25). This suggests the coin has more upside potential once the panic selling subsides.

According to CoinGlass, Bitcoin’s MVRV score reached a peak of 5.2 during the bull market of 2021. MVRV scores above 3 have historically indicated that Bitcoin is overvalued and could be due for a correction.

As shown in the chart above, BTC MVRV began to rise sharply in October 2023, coinciding with a surge in Bitcoin’s price. The MVRV score reached 2.89 on Monday, November 13th, as Bitcoin hit a record high of $108,250.

However, the MVRV score still remains below the levels seen during previous bull markets, suggesting that Bitcoin’s recent rally could still have further to go. For instance, the MVRV score reached a peak of 5.2 during the bull market of 2021.

Bitcoin prices may rebound as large BTC holders are still accumulating coins, and hopes of a strategic reserve are rising. MicroStrategy has added more BTC to its portfolio and now holds over 439,000 coins.

Marathon Digital, the largest Bitcoin miner, holds over 44,300 coins, while Riot Platforms and Hut 8 Mining have also added thousands of coins.

After observing MicroStrategy’s success, more companies are likely to purchase Bitcoins. Over the past four years, MicroStrategy has transformed from a fledgling technology company into an $80 billion firm.

Additionally, discussions about creating a strategic Bitcoin reserve, especially by Donald Trump, have gained traction. In a recent note, Bitwise noted that more countries could follow suit as the U.S. public debt has surged to over $36.4 trillion.

Finally, Bitcoin price has formed strong bullish technical patterns when viewed from a broader perspective. The weekly chart shows that the coin formed a cup pattern between 2021 and March this year. It then formed a handle between March and October, followed by a strong comeback.

Bitcoin has rallied in most weeks since then, and it is often normal for an asset in an uptrend to pause temporarily. Bitcoin’s target in this bull run is $122,000, which was determined by measuring the depth of the cup at 76%. Adding 76% to the cup’s upper side gives a target of $122,000.