MAC_D2023-12-11

BTC Price Correction Occurred, But Why There's Room for Further Upside

Today, $BTC plunged -8%. Normally, when a plunge like this occurs, most novice investors would panic and do nothing. But with the decision on whether or not to approve a $BTC Spot ETF next January, there's a lot of demand in the market to buy Bitcoin from a fundamental perspective, at least. To determine if $BTC is currently in an overheating zone or not, we can first look at the 'short-term investor inflows'. Looking at the Realized Cap - UTXO Age Bands (%), 1D to 1W cohort, we can see that in the past we have often seen a correction when these numbers hit 8%. However, the current 'Short Term SOPR' metric is at 5.65%, indicating an increase in inflows from new investors, but not yet overheating. Second, we can look at the 'Funding Rate' to identify overheating in the futures market. In the past, the '$BTC Funding Rate 'would have been 0.05% to indicate an overheated market, but it's currently only 0.02%, so it's hard to say that the market is overheating. For both of these reasons, we believe that the market is not yet overheated, and that it is likely to rebound soon after this correction. The on-chain data indicator that gives us a good time to buy $BTC in this situation is the 'short-term SPOR' indicator. This indicator gives us a good time to buy when short-term investors are selling Bitcoin at a loss, so when this indicator shows a value lower than 1, we should respond to the market with an aggressive long view.