Bitcoin is not expected to retest its record until later this year, but data shows this correction could get uglier before a recovery begins — similar to how the cryptocurrency fared between two all-time highs in 2021. A bitcoin valuation indicator, CryptoQuant’s Bitcoin Profit and Loss Index, is currently hovering around its own 365-day moving average. This key threshold helps traders determine whether bitcoin is in a bull or bear market. Historically, a crossover of the index to the downside has marked major corrections, including the one between May and July 2021 and, that same year, between November and December 2021. At the same time, however, trader margins have become extremely negative, which could be seen as a potential signal of a bottom. “Bitcoin is at a level where a local bottom can form or a major ‘summer of 2021′ style correction can occur,” said Julio Moreno, CryptoQuant’s head of research. “Traders’ unrealized margins are now -17%, the most negative since shortly after the FTX exchange collapse in November 2022,” he added. “Prices have typically bottomed out when traders’ margins touch extremely negative levels as seen currently.” Bitcoin is currently retesting key support at $57,000 for a third day after sliding below that level last week. The flagship cryptocurrency’s price has been in a slump since March when it hit a record of more than $73,000 and quickly corrected. Since then, the crypto has been struggling to return to those highs. Even with the lull in prices, demand for bitcoin has been on an uptrend since May, based on the growing amount of whales holding the cryptocurrency. However, Bitcoin network activity shows the token still has some headwinds. “Stablecoin liquidity is still not accelerating, a necessary condition for a price rally,” Moreno said. “While there is some positive movement in the stablecoin market through [USD Coin], the lack of corresponding growth in USDT [Tether] market cap may delay or dampen the potential for a significant bitcoin price rally. Furthermore, mid and large-sized bitcoin miners are still selling a portion of their holdings.”
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