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Why the Recent Liquidity-Driven Correction is Technical, not Fundamental?
The recent spot price correction of bitcoin has caught many traders off guard, as the drawdown has correlated with a sudden drop of liquidity. Despite the recent weakness, BTCUSD has still climbed 64 percent year-to-date. In my opinion, the recent correction is definitely a technical one, as Bitcoin’s on-chain fundamentals remain promising. In this article we’ll go through several factors supporting my thesis. First of all, bitcoin’s 200-day moving average (red, 200DMA) acts as a support line for the asset. Bitcoin decisively crossed the 200-day moving average in January, and the 200DMA acted as a crucial support in March’s V-shaped recovery (white). With the current spot-related weakness, I expect BTCUSD to be deflected from the 200DMA surface again (white). 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). Praeterea, bitcoin’s older UTXO waves 2Y-3Y (blue) and 3Y-5Y (yellow) both support the spot price. The 2Y-3Y wave already started its accumulation path in 2022, after a long epoch of stagnation. The 3Y-5Y UTXO wave has radically shifted its trajectory in early 2023, pointing upwards and mirroring accumulation in this cohort. Both UTXO waves represent long time horizon investors and so called “smart money”. As an epilogus, bitcoin is supported by multiple on-chain and fundamental tailwinds, despite the recent technical correction. Bitcoin's 2024 halving is only 348 days away, gradually rising investor's expectations. The leading cryptocurrency sits firmly in its pre-halving accumulation cycle, don't miss out!