Analysts have begun to fear a crypto market correction despite the Christmas rally.
Bitcoin traded as high as $28,500 this past weekend while Ethereum peaked near $740, an all-time high for BTC and year-to-date high for ETH, respectively.
While the medium-term to long-term trend of the crypto market remains bullish, some have begun to fear that a correction is building.
The crypto market is preparing to correct?
A growing number of analysts are starting to expect a correction as the price goes vertical at $28,000.
“Everything in $BTC is now flashing orange alerts. IMO new crypto trades should be handled as short-term entries. I added some $ETH and a few alts yesterday for short-term moves. If I happen to be wrong and this flies, great. If not, it was worth the punt.”
Everything in $BTC is now flashing orange alerts. IMO new crypto trades should be handled as short-term entries. I added some $ETH and a few alts yesterday for short-term moves. If I happen to be wrong and this flies, great. If not, it was worth the punt.
— Alex (@classicmacro) December 28, 2020
He added shortly afterward that while he thinks altcoins may have some legs here, the crypto market is “late in the move.”
Another prominent analyst, “Bitcoin Jack,” also made a similar assertion that the market is likely nearing a top soon.
The historically accurate trader shared the chart below, which shows that the current Bitcoin price is almost three times the “on-chain average price” for BTC. The last time this metric was this high was in 2017, when the market peaked at $20,000. Further, previous instances of this metric rallying to the 2.8-3.2 region have marked historical macro highs.
This is a sign that there is lots of risk-taking and investors should be cautious of a pullback:
“A factor of 3x on chain average paid price for current circulating bitcoin supply equals risk. When this normalizes (at higher or lower prices), that’s when taking on irresponsible long leveraged exposure is less risky == big profits. Now is not the time”
What makes this a bit confusing is unlike previous Bitcoin bull markets, BTC has yet to see a serious drawdown. Instead, each strong dip of 5-10 percent is bought up rapidly as investors seek to continue to add capital to their positions despite an increasing price.
Many see the strong buying pressure as a sign of institutional interest in the leading cryptocurrency.