The cryptocurrency market is experiencing a price fluctuation that has touched the nerves of global investors. Since hitting a historical high of $109,000 on January 20, the price of Bitcoin has fallen by more than 24% in just four months, hovering around $82,824 at press time. Faced with this violent shock, many senior analysts and institutional executives pointed out to Cointelegraph that the current adjustment of Bitcoin prices is a “normal cyclical correction” and the real peak of the bull market still needs to wait for the macroeconomic narrative to turn.
“This is by no means a signal of the end of the bull market, but a necessary cooling process for the market in the context of global liquidity tightening.” Ben Simpson, CEO of cryptocurrency asset management platform Collective Shift, emphasized in an interview. He conducted a quantitative analysis of the historical cycle of Bitcoin prices: there have been only 3-4 declines of more than 25% in the current bear market stage, while there were as many as 12 corrections of similar scale in the previous cycle. This comparison reveals a key fact – the intensity of Bitcoin price fluctuations is gradually converging with the maturity of the market, but the cyclical characteristics are still distinct.
The interweaving of historical laws and current reality
From a technical perspective, the trend of Bitcoin prices seems to be highly consistent with the historical script. Nick Forster, founder of the decentralized derivatives platform Derive, pointed out that when Bitcoin prices experience a long-term upward trend, a 20%-30% intermediate correction almost becomes a “must-go” path. For example, after Trump’s victory in November 2023, Bitcoin prices soared 36% in a month and broke through the psychological barrier of $100,000 for the first time in December. This kind of profit-taking after a rapid rise in the short term is essentially the same as the oscillation pattern in the bull market in 2017 and 2021.
But under the historical similarities, the driving logic behind Bitcoin price fluctuations has undergone profound evolution. Adrian Przelozny, CEO of Independent Reserve, pointed out that the current market is facing a “stress test of all asset classes”: the Federal Reserve maintains a high interest rate policy, geopolitical conflicts push up energy prices, and the uncertainty of the US tariff policy on China together constitute a “triple shackle” that suppresses risky assets. In this macro context, the linkage between Bitcoin prices and traditional capital markets has significantly increased, and its safe-haven attribute of “digital gold” has temporarily given way to the systemic risks brought about by liquidity tightening.
Liquidity dilemma and narrative vacuum period
For the short-term trend of Bitcoin prices, analysts generally look to the monetary policy toolbox of global central banks. Simpson predicts that the next stage of the market narrative may revolve around “Federal Reserve rate cut expectations”: if the United States stops shrinking its balance sheet and restarts quantitative easing in the second half of the year, the release of US dollar liquidity will directly boost Bitcoin prices. This logic has been fully verified in the super-loose cycle after the 2020 COVID-19 pandemic-when the price of Bitcoin climbed from a low of $3,000 to $64,000, creating an astonishing 20-fold increase.
However, the market’s divergence is becoming more explicit. Charles Edwards, founder of Capriole Investments, made a cautious judgment of “50-50”: Although on-chain data shows that miners’ selling pressure has intensified and long-term holders have taken profits, the trend of Bitcoin prices may reverse quickly after the policy shift. This uncertainty peaked in the “bull market end theory” of CryptoQuant CEO Ki Young Ju – he predicted that Bitcoin prices will enter a 6-12 month bear market or sideways phase until a new round of halving effects and institutional capital inflows form a synergy.
Structural opportunities in price fluctuations
It is worth noting that the current correction in Bitcoin prices is reshaping the behavior patterns of market participants. Data from the on-chain analysis platform Glassnode shows that the holdings of “whale addresses” holding more than 1,000 BTC have increased by 2.3% in the past 30 days, indicating that institutional investors are taking advantage of low prices to strategically build positions. At the same time, the single-week net inflow of Bitcoin ETFs has returned to positive values, and the size of BlackRock’s IBIT fund has exceeded US$18 billion, showing that traditional capital recognizes the long-term value of Bitcoin prices.
The trends in the derivatives market also send positive signals. Although the price of Bitcoin continues to fluctuate, the funding rate of perpetual contracts has always remained at a healthy level below 0.01%, and there has been no over-leverage at the end of the bull market in 2021. The volatility surface of the options market shows that investors’ demand for call options for Bitcoin prices to reach $120,000 by the end of the year has steadily increased, which echoes analysts’ judgment that “the peak of the cycle has not yet arrived.”
Waiting for the arrival of the “perfect storm”
When asked about the ultimate catalyst for Bitcoin prices, the interviewees unanimously mentioned the importance of “narrative innovation.” From a technical perspective, the outbreak of Bitcoin’s Layer2 ecosystem, the increased adoption of the Runes protocol, and the migration of miners’ computing power to sustainable energy may all become new fundamentals supporting Bitcoin prices. In the macro dimension, the policy game in the US election year, the deepening of the global sovereign debt crisis, and the accelerated advancement of central bank digital currencies (CBDCs) may force more investors to re-evaluate Bitcoin’s asset positioning.
“The market needs a perfect storm,” Simpson concluded at the end of the interview. “When the supply contraction caused by the halving, the liquidity flooding driven by the interest rate cuts, and the safe-haven demand catalyzed by geopolitical risks work together, the upward momentum of Bitcoin prices will far exceed market expectations.” The deep correction at this moment may be accumulating energy across the cycle for this storm.
