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The Accumulation Cycle Still Intact, Despite the Recent Correction
Bitcoin has moved into a -10 percent correction after ascending almost 100 percent during early 2023. While the price action looks bad, traders should still remember to stay calm. From a purely technical point of view, bitcoin passed its critical inflection point at the turn of the year, where the descending and ascending trend lines met (black). The point acts as a technical watershed and defines the market from 2021 until the halving year of 2024. In the early 2023, bitcoin has been able to rise above the realized price (grey) indicator. The realized price is important because it represents the average price of all bitcoin purchases. At the same time, the realized price illustrates that average bitcoin buyers are making a profit on their investments. In the broader picture, bitcoin’s market behavior can be segmented into accumulation (turquoise) and distribution (purple) phases, which together form a multi-year series of cycles. Institutional money has traditionally favored accumulation cycles, while retail investors have been active in distribution cycles. Bitcoin’s history is also defined by halving events, which are always preceded by a pre-halving accumulation cycle (turquoise). Despite the falling spot price, bitcoin's exchange stablecoin ratio (yellow, ESR) is currently acting as a leading indicator to bitcoin, and other digital assets in correlation. The ESR and bitcoin's spot price converged from 2021 to 2022, however the last year's selling pressure broke their correlation. Pivoting its path back in late 2022, the exchange stablecoin ratio is again reaching towards new highs. In the current market structure, ESR acts as a magnet to bitcoin's spot price. As an epilogus, bitcoin's market structure is still supported by multiple technical and on-chain factors. The multi-year inflection point backs bitcoin technically. Additionally, the leading cryptocurrency is supported by realized price, growing ESR divergence, and pre-halving accumulation cycle.