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Bitcoin’s parabolic rise well above its previous record levels has seen a lot of déjà vu from 2017 onwards and a number of analysts are concerned that the market is late for a significant correction.

On January 8 with Bitcoin (BTC), the price hit a new all-time high of $ 41,940 this week 28% collapse to $ 31,076 professional and private investors feared a strong trend reversal was imminent.

BTC / USDT 4-hour chart. Source: TradingView

Bitcoin’s historical data shows that rapid parabolic gains are usually followed by corrections as catastrophic as those following the 2017 bull run. As a result, the current market’s similarities to the euphoric mania of 2017 to 2018 bull run have not gone unnoticed.

Timothy Peterson, Cane Island’s global macro investment manager pointed out Which:

“Bitcoin risk is approaching 2017 levels. Investors buying at this price can expect to lose 40% of their investment in the future. However, the typical maximum intake is 30%, so this risk is only modestly increased from the average. “

Bitcoin risk based on current valuation levels. Source: Twitter

In a follow-up private conversation with Cointelegraph, Peterson noted that there is still a short-term bull case for Bitcoin stating:

“To hit bitcoin’s valuation to hit 2017 levels, it would have to be at least $ 80,000. There is a small chance that this would happen, and if it did, it would happen quickly. High prices tend to go even higher. “

Retest the raised bell or bottom support?

There are a few telltale signs that Bitcoin’s rapid gains reflect a manic market on the brink of a correciton and the current bull versus bear debate revolves around whether this week’s volatility is a healthy downturn to test lower supports before price the next step higher.

LookIntoBitcoin founder and Decentrader analyst Philip Swift recently made the case that Bitcoin’s recent price action reflected a “necessary pullout / slowdown” and he noted that several indicators are flashing red, indicating that the pace of BTC’s price rise was reaching extremes.

Swift said:

“The price has now retreated below the x3 multiple where I expect it to remain for a while. As others have said, the price probably went up to x3 (more than x2) because we’ve had an earlier mania stage in the cycle versus the previous cycle where both retail and institutions bought. “

Bitcoin Golden Ratio Multiplier. Source: Twitter

Swift’s analysis indicates that BTC is likely to trade sideways and rise slowly over the short term, but at a slower pace “as some money / profit turns into altcoins.” Especially the recent price movements in altcoins DeFi-related tokens indicate that this rotation may already be in progress.

BTC bulls are not ready yet

While analysts and chart watchers ask Bitcoin to take a breather, bullish traders may have indicated that they have different plans. In several instances this week, bulls have defended retesting lower support by buying in every dip and there is also an expectation that institutional inflows into BTC will resume as Grayscale has reopened its GBTC product family.

A look at the 30-day average daily sentiment score for Bitcoin shows that despite the downturn, the average score has fallen only slightly from recent highs and is well above the lows of previous down cycles.

Price versus 30-day average sentiment score. Source: The tie

While few know the exact course that Bitcoin’s price action will follow this weekend, the strengthening fundamentals are from a technical perspective, increased institutional influx and positive announcements government regulators suggest the recent dips were nothing more than healthy corrections that would undoubtedly happen before Bitcoin gears up to hit a new 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 trade move carries risks, you should do your own research when making a decision.