By Gabriel Joyce
Santiment’s latest report casts a shadow over Bitcoin’s recent rally to $64,000, warning of a potential short-term correction in March. Citing concerns such as inflated trader returns and weak whale accumulation, the crypto analytics platform suggests the market may be entering a danger zone, signaling a cautious outlook for the cryptocurrency after its stellar performance last month.
Bitcoin’s Surge Faces Potential Correction
Santiment, a leading crypto intelligence platform, has spotlighted a potential shift in Bitcoin’s market dynamics following its impressive rally last month. Despite redefining what a “leap year” could mean with a significant performance boost, Bitcoin might be on the brink of a different trajectory in March.
The platform’s recent report highlights several on-chain indicators that point to an increased risk of a short-term market correction, signaling a precarious phase ahead.
Entering Uncertain Waters
In February, Bitcoin witnessed a remarkable 45% increase, successively breaking the $45,000, $50,000, $55,000, and $60,000 marks, only to face resistance at $64,000. Currently, it’s trading around $62,000, according to CoinMarketCap data. This rally has not only fueled market enthusiasm but also ignited a fear of missing out (FOMO) among investors, albeit at a reasonable level.
However, this enthusiasm might soon be tempered. The report indicates that both long-term and short-term active Bitcoin wallets could start offloading their holdings, prompted by significantly increased average trading returns. Wallets that have been active over the last 30 days have seen profits exceed 20%, although this figure has dipped to 14% recently.
Moreover, wallets active over the past year have witnessed over 64% returns, the highest since April 2021, and a figure not even seen during Bitcoin’s peak in November 2021 when it hit its all-time high.
This stark increase in profitability may suggest that a corrective phase is on the horizon, as traders and investors might decide to cash in on their gains, potentially leading to a downturn in Bitcoin’s market value.
Signs of Market Adjustments
Adding to the narrative of potential market corrections, Bitcoin whales have exhibited behavior indicative of redistribution of their holdings, according to Santiment. This includes transferring assets between exchanges and wallets, either to prepare for sales or to enhance security through diversification.
Despite these movements, the volume of Bitcoin on exchanges is reminiscent of 2017 levels, suggesting that a significant portion of assets is not being moved for immediate sale.
The analysis by Santiment further elucidates that a combination of exceptionally high trader returns and subdued whale activity typically precedes a market correction. The platform contemplates various scenarios that could unfold from this point.
The market’s reaction, particularly from recent buyers and smaller traders, could significantly influence Bitcoin’s direction. If prices dip, the actions of these groups, whether they sell in panic or hold, alongside the response of whales to potentially buy the dip, will be crucial. Additionally, the trend in the mean dollar invested age could offer insights into whether the market will stabilize or continue its volatility.
As these dynamics play out, one thing remains clear: the crypto market is poised for a tumultuous March, with various factors suggesting a reevaluation of Bitcoin’s recent gains may be imminent.
