Bitcoin’s stellar bull run that started in 2022 just hit a pivotal moment. There are a few major signs that indicate the cryptocurrency is likely approaching the top of its rally. This positive development comes with greater potential to hit a market peak. While new all-time highs remain a possibility, analysts are urging caution, noting the potential for significant volatility and a possible correction in the near future. Our examination has been informed by Bitcoin’s price movement, on-chain metrics, and technical indicators, including Elliott Wave structures.
At the beginning of 2024, the cryptocurrency market exploded. This remarkable increase, mostly driven by the launch of Bitcoin ETFs, drove prices to heights unseen in several years. New data paints a different picture, one of mixed bullish and bearish signals. Comprehending these elements will be key for any investor seeking to successfully navigate the rapidly changing cryptocurrency landscape.
Elliott Wave Analysis Signals Caution
One of the major indicators pointing towards a possible market peak is the Elliott Wave analysis. This technical analysis method identifies recurring price patterns, or "waves," in financial markets, which can be used to forecast future price movements. This bullish count suggests Bitcoin has completed a five-wave advance from the 2022 low. This formation will almost always indicate the beginning of a large correction.
_The Key to Elliott Wave Analysis is to locate the 3rd wave."
The analysis calls attention to the presence of the “vertical 3rd wave” in Bitcoin’s recent price movement, suggesting a powerful bullish impulse. More interestingly, it notes that the cryptocurrency is today in the very last fifth wave of the cycle. This has been the case since the cycle that started in 2022. Combined, this points to the rally being long in the tooth.
The Elliott Wave analysis points to a possible correction on the horizon. It further paints a picture of different Q2 2024 outcomes for Bitcoin. Increasingly, the most likely scenario here feels like a test to new highs pushed higher by not only continued ETF inflows but overt bullishness on the market itself. Analysts warn that despite Bitcoin breaking into new all-time highs territory this time, the chances of Bitcoin correcting like before are still high.
On-Chain Data Reveals Long-Term Holding Patterns
Another major indicator to watch for is the trend of long-term Bitcoin holders. We are seeing a really sharp jump in the percent of all coins that are over a year old and have never moved. By April 2nd, this day’s figure had increased from 61.7% to 63.61%.
"The percentage of coins that have not moved in over a year. This metric measures the behaviors of long-term holders of Bitcoin." - Vincent Duchaine of WealthUmbrella
The increase in long-term holding shows that a majority of Bitcoin investors are choosing to HODL their Bitcoin. They would rather keep it than cash in at a profit. This might be a sign of a deep belief in the long-term promise of the coin. This trend may be an early sign of a looming supply squeeze. If these holders decide to sell, this may increase price volatility.
Bitcoin is in the middle of a major uptick of smart money accumulating their newest addresses! That horrific new rate is up 25% from last summer’s low. The increase in new users is a strong indication that we’re seeing an increase in interest around Bitcoin. This renewed excitement might keep prices climbing in the near term. Even further adoption can lead to more seller pressure. This means that new users tend to realize profits more quickly during price runs, which puts additional downward pressure on prices.
ETF Flows and Price Targets
The launch of Bitcoin ETFs has certainly been one of the biggest catalysts fueling the price surge seen in early 2024. For institutional investors and retail traders these ETFs make acquiring direct exposure to Bitcoin even simpler. As an industry, we’ve all been experiencing unprecedented inflows and skyrocketing demand.
Bitcoin was riding a major tailwind. ETF flows are still predominantly bullish, but they’re converting less of that bullishness into flows than they used to. After a long stretch of robust inflows, the outflows have meaningfully receded, with flows now returning to neutral ground, bouncing around zero net flow. More recently, ETF flows became more supportive with the tide turning into bullish inflows beginning April 21st, helping to form a base around the April 7th low.
Even with these potential headwinds, some analysts are taking an optimistic view of Bitcoin’s long-term prospects. They point out examples of price bottoms in bull and bear markets. Recent data indicates a bounce from a bull market bottoming zone. They emphasize the importance of supply and demand dynamics, which, for now, appear to support the April 7th low.
To achieve these minimum targets of no less than $120,000, Bitcoin first has to breakout above the $102,000 area and then break past the $109,354 level. At the end of the day, we may still have a series of lower highs leading us into 2026, right up until the last flush.
"While we still believe the original price targets of $106,000 - $190,000 are attainable, we do believe risk has increased. As a result, we will likely reduce some risk on the next rally to all-time highs." - io-fund.com
Market Top Indicators
Bitcoin recently provided several signs of a market top. Each one digs into one of the many different sides of the Bitcoin blockchain ecosystem. Taken together, these indicators can offer useful clues about the general health of and mood within the market.
One of the main indicators to look for is the Puell Multiple. It shows how the current value of newly mined Bitcoin lines up with its historical average. High Puell Multiple values indicate miners are dumping their mined Bitcoin at a premium. This kind of behavior is usually a precursor to market exuberance and can be a reliable marker of a market top. Another good indicator is the MVRV ratio, which compares Bitcoin’s market capitalization to its realized market capitalization. High MVRV values can therefore be interpreted as a signal that Bitcoin is overvalued, thereby heightening the risk of a correction.
Crypto analysts are always on the lookout for important metrics to gauge the overall Bitcoin network’s health. They’d rather point to how many active addresses per day there are, or transaction volume, or network hashrate. When we see declines in these metrics, that should serve as an early warning sign that the market is starting to lose its momentum.
Potential Scenarios and Risk Management
Investors are left to sift through contradictory market signals. First, it’s vital for them to assess multiple possible future conditions and to implement best practices in risk management. Bitcoin recently experienced a 9% drop only to recover slightly by 1.88%, illustrating how quickly the emerging cryptocurrency market can plummet and rebound.
One bullish case is that Bitcoin remains in a strong uptrend, fuelled by ongoing ETF inflows and overall good vibes. Under that scenario, the cryptocurrency would smash through its previous all-time highs — well above $100K, maybe even above $120K. Even in this bullish scenario, investors will still need to have their guard up. Markets never go up in a straight line, so brace yourself for a correction.
The second possibility is that Bitcoin begins a long consolidation period, sideways trading in a range with clear support and resistance. It could happen if ETF inflows slow down and market sentiment turns more positive-neutral. Investors could be looking to take profits on some of their positions. That dash forward is a smart one. They should wait until the upward trend is more clear before making any permanent moves.
Time to load the bear scenario. This reverse could be caused by bad press, regulatory matters or even a dip in the general market. Most importantly in this green investing space, investors need to stay focused and ride out the waves, not be knee-jerk sellers. By the way, Bitcoin is generally subject to major price fluctuations. Take heart in knowing that corrections can be a healthy piece of any market cycle.
"While I do not think this outcome is the most probable given the price action, it still must be respected, which is why it is on my chart."
In any case, proper risk management is a must and investors should always keep this in mind. This means diversifying their portfolio, placing stop-loss orders, and excessive leverage. As always, perform your own diligence and consult with a financial advisor before making any investment decisions.
