Bitcoin, the leading cryptocurrency by market capitalization, has recently experienced a significant and sudden price correction, sparking debate among investors.

Concerns have surfaced about whether this downturn signals the conclusion of the current bull cycle or merely represents a temporary setback.

While short-term holders face losses, long-term metrics provide a broader perspective on Bitcoin’s trajectory, as analyzed by CryptoQuant’s Avocado Onchain in a recent report.

Opportunity Or End of The Bull Cycle?

According to Avocado Onchain, the realized price for investors who entered the market during Bitcoin’s recent peak at $98,000 places them in a loss-making position.

However, for those who invested between one to three months ago, the realized price is significantly lower at $71,000, offering a cushion against the current correction.

Avocado pointed out that historical patterns from Bitcoin’s 2021 bull cycle reveal similar alternations between record highs and sharp corrections, suggesting that these dips may not necessarily indicate the end of the cycle. Instead, they have historically been “opportunities” for market rebalancing and subsequent growth.

A key indicator analyzed is the 30-day moving average of the short-term SOPR (Spent Output Profit Ratio). This metric tracks whether recent market participants are selling at a profit or a loss.

The current SOPR data reveals that recent short-term inflows into Bitcoin have yet to result in substantial profit-taking. Unlike previous cycle peaks characterized by aggressive selling, the ongoing correction appears subdued, indicating that the market may still have room for upward movement.

Bitcoin Short-Term Dips vs. Long-Term Trends

Additionally, Avocado Onchain highlights the importance of distinguishing between short-term corrections and broader cycle trends. Bitcoin’s tendency to rebound after corrections in past bull cycles reinforces the notion that the current downturn might not mark the cycle’s end.

These insights align with the behaviour of long-term holders, who often use corrections to consolidate their positions, strengthening market resilience.

Avocado concluded the analysis, noting:

For investors who have yet to enter the market, this may be an excellent opportunity to buy Bitcoin at a discount. Instead of succumbing to panic selling during short-term downturns, adopting a long-term perspective and a dollar-cost averaging (DCA) strategy could be a more effective approach.

At the time of writing, Bitcoin is seeing a gradual rebound in its price surging by 1.3% in the past 1 hour. Regardless, the asset still appears to be overshadowed by the bears as BTC remains down by 3.5% in the past day and 10.5% from its peak of $108,135 recorded last week.

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Bitcoin has seen continuous bullish momentum in recent weeks resulting in the asset’s consistent new highs. According to recent analysis, this momentum appears to not just be random as it comes amid major moves behind the scenes.

Particularly, recent data indicates that Bitcoin reserves have dropped to a historic low of 2.4 million, signaling a “supply shock” that has coincided with a surge in Bitcoin’s price.

This reduction in exchange reserves, coupled with strong demand, has created a bullish environment that could set the stage for further price increases.

A Supply Shock In The Making

A CryptoQuant analyst known as Kripto Baykus shared the outlook on Bitcoin’s exchange reserve hitting historic low in a post on the QuickTake platform. In the post, Baykus highlighted that the year began with Bitcoin reserves at approximately 3 million on exchanges.

However, a steady decline throughout 2024 has led to the current levels, reflecting a clear shift in investor behaviour. Institutional investors, in particular, have embraced long-term holding strategies, pulling their assets off exchanges, Baykus noted. The analyst added:

This shift is particularly evident among institutional investors, who have increasingly embraced the “hodl” approach, demonstrating strong confidence in Bitcoin’s future potential.

Meanwhile, Bitcoin’s price has mirrored this movement, starting the year at around $40,000 and accelerating in November to surpass $100,000, eventually reaching a new peak above $104,000. Baykus wrote:

The limited supply of Bitcoin, combined with shrinking reserves, is seen as a strong bullish signal for the market. Investors are pricing in the effects of the supply shock, and if the trend persists, Bitcoin is likely to break further records in late 2024 and into 2025.

Bitcoin Current Demand Stance

In addition to supply-related trends, another CryptoQuant analyst known as Yonsei Dent has recently turned to the Coinbase Premium Index to offer insights into Bitcoin’s demand in North America.

This metric tracks activity on Coinbase, one of the largest exchanges in the region, and has traditionally been used to predict short-term price movements. However, over the past two weeks, a divergence between the Coinbase Premium Index and Bitcoin’s price has raised concerns.

Dent pointed out that despite Bitcoin’s price rising from $94,000 to $106,000 during this period, the Coinbase Premium has declined. This suggests that the recent price surge may not have been driven by US.-based demand, raising questions about the medium-term momentum of Bitcoin’s rally.

Dent noted:

If this price surge has not been supported by U.S.-based demand, it could indicate underlying weakness in medium-term upward momentum. Investors should remain cautious and monitor this development closely.

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Meet Samuel Edyme, Nickname – HIM-buktu. A web3 content writer, journalist, and aspiring trader, Edyme is as versatile as they come. With a knack for words and a nose for trends, he has penned pieces for numerous industry player, including AMBCrypto, Blockchain.News, and Blockchain Reporter, among others.