Bitcoin (BTC) looks done with the correction in the shallowest drawdown cycle

Bitcoin (BTC) had the smallest drawdown in percentage terms during the latest correction. Despite this, the period of sliding prices was protracted compared to the sharp V-shaped crashes of previous cycles. 

The Bitcoin (BTC) drawdown may be over, as the leading coin recovered close to $64,000. The recent market cycle did not go as high as expected, but the correction was also relatively smaller. Compared to previous cycles, BTC only dipped around 25% from its peak. 

Unlike previous cycles, BTC did not create outsized panic, which could lead to a prolonged “crypto winter”. The higher liquidity of the market, both against stablecoins and with fiat inflows from ETFs, meant this time, the BTC drawdown did not lead to peak volatility. 

Also Read: Mt. Gox wallet transfers $2.7 billion in BTC to unknown address

Cycle drawdowns are growing shallower for each market cycle. Yet the current drawdown, which is smaller than 30%, would be a precedent, if the trend reverses permanently. The shallowest previous drawdown reversed only after erasing more than 70% from the peak BTC value.

Partially, the smaller drawdown is a technical issue, as BTC is less volatile at its higher price, and less likely to erase 80% of its value. The presence of big ETF players also adds a layer of support to the leading coin. 

BTC also got a boost from the closely watched selling originating from Germany’s vault of confiscated coins. The ability to absorb the selling with a price low at $53,000 led to additional confidence in the market. 

BTC solidifies status as a high-value reserve coin

The bull market of 2024 led to additional expectations for Bitcoin’s use cases. The appearance of Ordinals and Runes added a layer of tokenization. Some of the collectibles on the Bitcoin network had a brief rally. 

However, the Bitcoin DeFi summer did not materialize, as value shifted to Ethereum (ETH). Instead, BTC saw demand from whales, building new wallets. Both retail selling and the holdings of “bear whales” were absorbed by new vaults, with a long-term outlook. 

The ETF narrative added a new aspect to the BTC price. The recent recovery started with news of renewed inflows into a total of 39 ETFs. It took about seven days for the ETF buying pressure to join renewed spot market hype. 

Also Read: Crypto investment products see $1.44B in weekly inflows

There are also signs that mainstream appetite for BTC may still grow. Outside of crypto trading, the Grayscale GBTC fund is now trading at a discount. Based on the BTC component in each share, GBTC is trading at the equivalent of $56,000 per BTC . A similar small discount is seen on the Grayscale Ethereum investment tool. 

At the same time, accumulation continued in July, and was even more active compared to previous periods where BTC traded much lower. The recent round of accumulation injected $4B into the market, coming from smart money buyers.

Can Bitcoin hold the current trend?

BTC prices have to hold onto the newly regained levels, with an eye of extending the rally to the $68,000 tier. The recent recovery is seen as a scenario leading to new highs above $80,000 in the next few months of the bull cycle. 

The recent rally close to $64,000 may lead to a step backward in the short term, before climbing again. With a volatility of 2.11% in the past month, BTC moves by a few hundred dollars each day. After peaking, BTC took a step back to $63,454.80.

The recent rally is also gaining momentum in terms of volumes, rising to more than $37B in 24 hours. The current supply of Tether (USDT) has not grown to support the prices, but the turnover has grown, spiking to $73B in 24 hours. 

The recent price moves for BTC caused bullish attitudes from smart money. Long positions still dominate, making more than 55% of Binance traders and above 75% on Gate.IO. At the same time, crowd sentiment turned more bearish, even after buying the recent dip. 

The Bitcoin fear and greed index also switched up in just seven days, from 27 points in the “fear” range, to 65 points, or “greed”.

Cryptopolitan reporting by Hristina Vasileva