Bitcoin Correction: A Bullish Disguise?

Amidst a price correction following its all-time high, Bitcoin (BTC) market participants, including miners, whales, and large investors, have been selling to realize profits. However, CryptoQuant analysts believe the bull cycle is ongoing, as price valuation metrics remain below historical market tops.

Bitcoin Price Correction: A Bullish Signal in Disguise

Following its ascent to an all-time high of $73,700, Bitcoin (BTC) has entered a period of price correction. Market participants, including miners, whales, and large investors, have been selling their BTC to capitalize on profits.

However, analysts at CryptoQuant believe that the Bitcoin bull cycle is far from over, as price valuation metrics remain significantly below levels seen in past market tops.

Bitcoin in Correction Mode

The Bull-Bear Market Cycle Indicator signaled an overheated-bull phase last week as BTC plummeted from $73,700 to $60,700. This decline was triggered by traders selling their holdings to realize substantial profit margins.

CryptoQuant data reveals that unrealized profit margins surged to 69%, their highest level since March 2021, when BTC traded around $60,000. Despite the recent sell-off, unrealized profit margins remain elevated at 47%.

"Short-term Bitcoin holders (including traders) sold Bitcoin at the highest profit margin since May 2019," analysts observed. "This indicates that short-term Bitcoin holders took profits after this last price spike that took Bitcoin to a fresh all-time high."

Large BTC holders also sold their assets as prices soared above $70,000. Collectively, they moved 567,000 BTC when the digital asset reached its all-time high on March 12, representing 35% of total transfers on the Bitcoin network.

CryptoQuant suggests that some of these large holders are Bitcoin miners. Miners experienced record-high daily revenues during Bitcoin's recent rally, and their BTC transfers to over-the-counter desks increased notably as the crypto asset crossed $70,000.

Bull Cycle Far From Over

Despite the correction, demand for BTC in the United States has subsided, as evidenced by the negative Coinbase Premium shortly after BTC hit $73,000. Analysts speculate that if the correction persists, BTC could decline to the $58,000-$60,000 range, which represents the cost basis of large short-term holders.

However, from a longer-term perspective, BTC has not yet reached the peak of this bull cycle, as indicated by low levels of new investment flows. Currently, approximately 48% of Bitcoin investments originate from short-term holders, while historically, bull cycles typically conclude with 84%-92% of investments coming from this cohort.

"Furthermore, valuation metrics are not yet near levels consistent with past market tops," analysts added. "CryptoQuant P&L Index is still outside a market top zone (red area) and above the index 1-year moving average."

These observations suggest that while Bitcoin is undergoing a price correction, the underlying fundamentals remain bullish, indicating that the bull cycle may have further to run.