What Investors Need to Know Now
Cryptocurrency markets, led by Bitcoin, tend to follow a pattern of alternating cycles of growth and decline, reflecting investor sentiment and market fundamentals.
Since the start of the current bull cycle in January 2023, Bitcoin has shown significant gains in both price and market duration. This growth is supported by increased capital inflows from new investors, while existing players are reinvesting their profits.
However, recent indicators suggest that the market may now be entering the later stages of this cycle, raising questions about the future prospects of Bitcoin and the broader crypto market.
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Key indicators point to cautious optimism
One important metric that supports this observation is the percentage of Bitcoin transactions based on realized market capitalization – UTXO – over the past month, which currently stands at 36% according to a recent report. analyze Shared by CryptoQuant analyst Crypto Dan.
Dan revealed in his analysis that while the number is still below peak levels Observed in previous bull market cycleswhose downward trajectory suggests the market is “heading towards a cycle peak.”
Dan expects this peak to likely occur sometime between the first and second quarters of 2025. However, historical trends suggest that the ratio may increase sharply two to four times before the end of the cycle, rather than one explosive spike.
This pattern often signals market overheating, followed by a correction or bear cycle. Dan further emphasized that although the market is still Has profit potentialit is recommended to adopt a conservative risk management approach.
Historically, late bull market cycles are characterized by increased volatility as profit-taking begins to influence market behavior. Dan wrote:
Nonetheless, from a conservative perspective and with risk management in mind, caution is advised. Therefore, I intend to sell my holdings gradually.
Another important observation from on-chain data is the relationship between short-term traders and long-term holders. Historically, there has been a sharp increase in short term trading activity Usually precedes market corrections.
Traders who entered the market during the recent price rise may begin to sell off their holdings, causing temporary downward pressure on the price. Conversely, long-term holders tend to remain resilient during these periods, providing a stabilizing force to the market.
At the beginning of the new year, Bitcoin ushered in a recovery
After weeks of struggling and remaining below $100,000 in the final month of 2024, Bitcoin now appears to have recovered bullish momentum Starting in the first month of 2025.
Despite this, BTC entered the new year with prices below $95,000. However, a few days later, the asset continued its upward momentum, breaching the $100,000 price mark again and is currently trading at $101,624.
As of writing, BTC is up 3.9% over the past day, bringing its price close to the all-time high of over $108,000 set last month.
Featured image created using DALL-E, chart from TradingView
