Bitcoin Correction Warning: Could This Be a 'Summer of 2021' Repeat?

Bitcoin's Price Struggle: Could We Be Facing a Major Correction?

Bitcoin has been in a slump since hitting a record high of over $73,000 in March. While demand has been increasing, the cryptocurrency is currently retesting key support at $57,000 for a third day after sliding below that level last week.

A key indicator, CryptoQuant's Bitcoin Profit and Loss Index, is hovering around its 365-day moving average. Historically, a crossover of the index to the downside has marked major corrections, including the one between May and July 2021.

Julio Moreno, CryptoQuant's head of research, warns that traders' margins are extremely negative, reaching the most negative levels since the FTX exchange collapse in November 2022. This could be a sign of a bottom, but a major correction similar to the 'Summer of 2021' is also a possibility.

While demand for bitcoin has been on an uptrend since May, the token still faces some headwinds. Stablecoin liquidity, a necessary condition for a price rally, is not accelerating. The lack of corresponding growth in Tether market cap may delay or dampen the potential for a significant bitcoin price rally.

Furthermore, mid and large-sized bitcoin miners are still selling a portion of their holdings, which adds to the pressure on the market.

Despite the challenges, Bitcoin is not expected to retest its record until later this year. However, the data suggests that this correction could get uglier before a recovery begins.

Key Takeaways

• Bitcoin is facing a potential 'Summer of 2021' style correction.
• The CryptoQuant's Bitcoin Profit and Loss Index is signaling a potential downturn.
• Trader margins are extremely negative, reaching the lowest levels since the FTX collapse.
• Stablecoin liquidity and miner selling pressure are also contributing to the headwinds.
• Despite the challenges, a recovery is expected later this year.