As Bitcoin’s price experiences a decline, concerns about the potential end of the bull cycle are spreading among some investors. However, judging the market cycle based solely on the current correction may be premature, as numerous on-chain metrics remain bullish.
The recent price correction has been particularly painful for new entrants who invested during Bitcoin’s rally to its all-time high. For investors who entered within the past 1 to 4 weeks, the realized price is $98k, meaning they are currently at a loss. However, those who entered earlier, between 1 to 3 months ago, have a realized price of $71k. It appears unlikely that Bitcoin’s price will decline enough to approach this level. (Chart 1)
In the 2021 bull market, Bitcoin frequently alternated between new all-time highs and sharp corrections before the cycle concluded. During the stronger uptrend phases, Bitcoin’s price occasionally fell below the realized price of investors holding for 1 to 4 weeks but consistently rebounded afterward. This pattern suggests that such corrections do not necessarily signal the end of the cycle. (Chart 2)
Analyzing the 30-day moving average of the short-term SOPR (Spent Output Profit Ratio), we see evidence of recent short-term investor inflows. However, these investors have not yet realized substantial profits, and their activity does not resemble the intense selling seen at the peak of previous cycles. This indicates that the current correction is likely temporary. (Chart 3)
For investors who have yet to enter the market, this may be an excellent opportunity to buy Bitcoin at a discount. Instead of succumbing to panic selling during short-term downturns, adopting a long-term perspective and a dollar-cost averaging (DCA) strategy could be a more effective approach.
Written by Avocado_onchain
