- Trends in the loss of Bitcoin holders showed that the bulls may be hopeful of a recovery
- If historical trends repeat, an even deeper price correction could result
Bitcoin [BTC] has faced rejection twice from short-term two-day highs of $58.8k. After losing the psychological support of $60,000 last week, market sentiment was frightening.
However, there is some hope for a recovery. At the time of writing, the rising accumulation trend score suggested buyers were willing, but other numbers suggested more pain may be coming.
In a message on Xcrypto analyst Axel Adler drew attention to the current average losses of short-term holders (STHs). While the losses matched those of June 2023, the magnitude was much smaller than the pain in 2021 or 2022.
While it indicated a potential local low, it also showed that traders and investors should be prepared for the worst-case scenario of a sharper price decline on the charts.
Indications that Bitcoin’s local lows are behind us
CryptoQuant noted that the trader achieved a profit/loss margin of -17%. This was in the same ballpark as the market bottoms of the past two years, reinforcing the idea that Bitcoin is likely to rebound higher rather than sink lower.
According to founder and CEO of CryptoQuant Ki Young Ju, whales tend to use leverage at their cyclical lows, over-leveraging the markets and forcing another downward price rally.
At the time of writing, the Whales were not yet over-indebted, which could have paved the way for a deeper correction below the $50,000 mark.
Traders were humiliated after trying to grab the breakout and ATH
From the last week of May to July 3, the estimated leverage ratio on the stock markets rose rapidly. During that time, Bitcoin’s price hovered around $67,000-$69,000. When the price fell below $66,000, the leverage ratio rose again, indicating that traders were trying to time the bottom out of greed.
This past week, their hopes were dashed by the continued decline of BTC. The leverage ratio also fell, which could be healthy for the market.
Read Bitcoin’s [BTC] Price forecast 2024-25
Overall, it is difficult to say with certainty that Bitcoin has formed a bottom.
Multiple bottom signals flash and the seller’s pressure may start to drop. However, investors should still have a plan of action in case the price falls below $50,000.
