Bitcoin has surged by more than 12% in value over the past two days.
This move has more than erased Monday’s bloodbath, and according to analysts at Bitfinex, multiple signals are now green for a “relief rally.”
A Major Cleanup in the Crypto Market #
Bitcoin started the new week miserably with a drop of over 4%, but that blow seems to have already been wiped from the collective memory.
The price has recovered just as quickly and is now at its highest point in more than two weeks. Earlier today, we already took a closer look at the coin’s current price action.
According to Bitfinex analysts, the core of the recovery lies in the cleanup of leverage positions. They point to “extreme deleveraging, capitulation from short-term holders, and early signs of seller exhaustion,” which is pushing the market into a “stabilization phase.”
Extreme deleveraging means that a massive amount of leverage trading has been wiped out. There were many traders using borrowed money (leverage) to trade.
When the price fell, those positions that had bet on a rise had to be forcibly closed (i.e., sold). The market is now ‘relatively more stable’ because all that vulnerable leverage has disappeared from the market.
The capitulation from short-term holders means that investors holding their bitcoins for less than 155 days have sold en masse. This is often a sign that the weak hands have been shaken out, and it usually happens near a local bottom.
The last point is self-explanatory. Simply fewer bitcoins are being dumped on the market, making it easier for the price to move back up.
Has the Bitcoin Price Reached Its Peak? #
Bitcoin has lost as much as 36% of its value in almost 7 weeks. It is the largest correction of the bull market (rising market) that began in early 2023.
According to many, this also signals the end of that bull market. Not necessarily because it was the biggest drop, but because its duration now aligns almost perfectly with previous bull markets.
However, according to analyst PlanC, the classic four-year cycle story no longer holds true. He has been warning for over a year that we are in an extended bull market because the U.S. economy is recovering much more slowly this time.
Historically, Bitcoin almost always tracked that economic cycle: the BTC price reached its peak when the U.S. economy was running at full steam.
If that expansion phase comes later this time, PlanC says, the real Bitcoin top will also be pushed further out.