Is a Major Correction on the Horizon?

• Bitcoin has been on a price surge that has seen it hit its highest price this year at over $44,200, the highest it has hit since the bull market of early April last year.
• However, some analysts are concerned that a correction could be on the cards before the end of the year as the FOMO and macroeconomic factors wane off.

Bitcoin has been on a price surge for the past month, gaining 24% in that time to break past $44,000 for the first time in 20 months. But even as it set a yearly high yesterday, the eternal question investors are struggling with is whether a major correction is on the horizon.

As it so often does, Bitcoin is ending yet another year on a high after a lacklustre eight months in which it consolidated around the $30,000 range. At press time, it trades at $43,160, dipping slightly in the past two hours after when it traded north of $44,000. Its intra-day high of $44,345 was the highest it had hit since April 8 last year.

The factors pushing Bitcoin’s price surge are diverse, but the two that stick out are the anticipation around a spot ETF and the macroeconomic factors. On the former, the SEC is expected to give its response in January. This response was expected within the first week of the new year, but Gary Gensler has postponed the decision to late January. Still, this hasn’t dampened the mood and the entire community is hopeful that the long-awaited moment is finally here.

Macroeconomics are also playing right into Bitcoin’s hand. In recent times, global central banks have been seen to move towards rate cuts. This monetary easing could set the stage for a surge in the inflow of investment to “riskier” assets such as Bitcoin and stocks, and investors are already positioning themselves to gain from such market dynamics.

Bitcoin has been observed to be closely correlated with the global money supply. The rate cuts would increase this supply and in turn, push the price of Bitcoin to new heights.

And bitcoin correlates with various liquidity indicators more closely than any other asset I track. pic.twitter.com/WanyER15oN

— Lyn Alden (@LynAldenContact) December 4, 2023

Is a Correction Coming for Bitcoin?

As the market celebrates Bitcoin’s stellar run, the question most traders are struggling with is where the crypto goes from here.

Some of the pointers to a continued bull run include a rise in the flow of stablecoins into Bitcoin. This indicates more demand from investors and this is poised to set BTC up for more gains.

On this recent move up to $44k, we’re seeing a huge rotation of stablecoins into #Bitcoin.
The sideline capital is starting to be deployed again. pic.twitter.com/Vc30YLpgz8

— James Van Straten (@jimmyvs24) December 7, 2023

Another indicator that Bitcoin could still have levels to go is the market value to realized value (MVRV) indicator. This is used to determine whether an asset is below or above its fair value. If its above 3.7, then the market has peaked and it’s only downhill from there. If the value is below 1, then the market has bottomed and it’s likely to reverse the trend and start gaining.

Currently, BTC’s MVRV indicator stands at 2.061, indicating it still has levels to hit.

However, this indicator has been rising over the past week, and this usually signals some selling pressure in the market.

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