A bitcoin (BTC)-led crypto market correction has continued into its third day, with the asset losing a further 3.5% in the past 24 hours, nearing $94,000. This comes after it came within touching distance of the landmark $100,000 level for the first time.
Weekly Gains Pared to Just 3%
BTC has pared its weekly gains from over 10% to just 3% amid profit-taking on the expected pullback. Major tokens have followed the tumble, data shows, with Solana’s SOL, BNB, Cardano’s ADA, and dogecoin (DOGE) falling as much as 7% in the past 24 hours.
Broad-Based Correction
The broad-based CoinDesk 20 (CD20), a liquid index tracking the biggest tokens by market capitalization, minus stablecoins, is down nearly 3%. This indicates that the correction is not limited to individual assets but is a broader market phenomenon.
Analysts View Short-Term Target of $100,000 as Unchanged
Despite the correction, analysts view a short-term target of $100,000 per BTC as unchanged. They believe that a correction of as much as 10% from the peak (or as low as $92,000) is a natural phenomenon.
Leverage Overheating Cited as Cause of Correction
This correction occurred due to leverage overheating, as open interest and estimated leverage ratio reached annual highs. MAC_D, independent analyst at CryptoQuant, noted that "a 10-20% correction can be seen as a natural phenomenon."
On-Chain Metrics Indicate Bull Market with Upward Potential
From an on-chain perspective, cycle metrics such as MVRV, NUPL, and Puell Multiple still indicate that Bitcoin is in a bull market with upward potential. The key here is to identify major accumulation periods during corrections.
Short-Term SOPR Metric Identifies Profit-Taking
The Short-Term SOPR (Spent Output Profit Ratio) looks at whether people who have owned bitcoin for a short time are making or losing money when they sell. CryptoQuant defines short-term holders as those who have held BTC for over 1 hour but less than 155 days.
If the SOPR value is over 1, these holders are thought to be selling their bitcoin for more than they paid (making a profit). If it’s below 1, they’re selling for less (taking a loss). The SOPR value reached 1.096 last week, showing that short-term holders made money and were inclined to sell — contributing to the current weakness in BTC.
Bitcoin Tends to Bounce Back When Short-Term Holders Sell at a Loss
However, bitcoin tends to bounce back when short-term holders sell at a loss. And some say this creates a buying opportunity for traders at current levels to reach a potential target of $100,000 and above in the coming weeks.
Record Inflow of Stablecoin Capital into Binance Indicates End of Bull Market is Not Near
Ruslan Lienkha, chief of markets at YouHodler, noted that "the record inflow of stablecoin capital into Binance indicates that we are likely in the midst of, but not near, the end of the current bull market."
Market Volatility Expected to Increase
It’s a ride that some expect to be packed with market volatility. Augustine Fan, head of insights at SOFA, shared his thoughts on the matter: "It’s going to be extremely choppy markets for crypto in the near future with BTC technicals flashing extremely overbought levels, against an ‘animal spirit’ charged public that’s developing a FOMO appetite for the asset class."
Potential Squeeze on BTC Prices
We can see a further squeeze on BTC prices to the 120k to 130k area if markets manage to break the 100k wall, but are less sanguine on a smooth ride up with asset markets being overbought across the board.
Why This Correction is a Natural Phenomenon
This correction is a natural phenomenon due to leverage overheating. The open interest and estimated leverage ratio reached annual highs, leading to a 10-20% correction. However, this correction does not change the long-term target of $100,000 per BTC.
On-Chain Metrics Indicate Bull Market with Upward Potential
Cycle metrics such as MVRV, NUPL, and Puell Multiple still indicate that Bitcoin is in a bull market with upward potential. The key here is to identify major accumulation periods during corrections.