According to TechFlow, on January 10, cryptocurrency analyst Avocado_onchain wrote that Bitcoin's recent price drop has made market sentiment more negative. The downturn was driven by uncertainty about the Fed's rate cuts, cautious investor sentiment before President Trump's inauguration, and news that Bitcoin was allowed to be sold in the US Silk Road case, which exacerbated bearish sentiment. To assess the possibility of further corrections, I analyzed several on-chain data points compared to historical patterns:
The buy/sell ratio (30-day moving average) shows seller dominance. After Bitcoin's sharp rise in March 2024, an overheated market caused the ratio to fall below 1 as prices fell. Similarly, after Bitcoin hit a new all-time high, the market showed signs of overheating again, and the ratio trended downward, indicating that prices could fall further.
The short-term SOPR has fallen below 1, indicating that short-term investors are selling at a loss. This is similar to the downtrend observed in March 2024, which led to a prolonged correction phase. The current downtrend in the SOPR suggests further negative values that could lead to a larger correction.
Funding Rate: Whenever the 30-day moving average of the funding rate is pointing downwards, the funding rate tends to turn negative before a rebound. Currently, the moving average is trending downwards, suggesting that negative funding rates could occur soon, which could make market sentiment outright bearish before a potential recovery.
While this analysis focuses on short-term price action, in the long run, Bitcoin is likely to rebound and resume its uptrend after completing the correction phase. Investors should maintain a strategic perspective, avoid reacting to short-term noise, and focus on the broader bullish trajectory.
