The top cryptocurrency printed a low of $42,212 during the Asian hours, a level not seen since Feb. 8, marking a 35% drop from the record high of $64,880 reached on April 14, according to CoinDesk 20 data.
The bitcoin (BTC) price has seen four corrections from new price highs so far this year, out of which the latest 35% retreat is the biggest.
Chart analysts had warned of a pullback to $42,000 before a resumption of the broader bull run.
“When combining fundamentals such as positive net inflows of bitcoin to exchanges, mixed with the previously mentioned technicals of lower high and lower low, we can ignore what large egos and influencers say, and see that a pullback was bound to happen,” Justin Chu, senior trader at the regulated digital asset investment manager Wave Financial, said in an email.
Centralized exchanges registered a net bitcoin inflow of over 35,000 BTC in the past five days, as noted by IntoTheBlock on Twitter. Investors typically move coins to exchanges when they intend to liquidate their holdings.
The first leg of the latest correction, represented by the drop from $64,000 to $47,000 in the second half of April, shook out excess bullish leverage from the derivatives market, opening the doors for a more sustained move higher.
While the price bounced early this month, the momentum stalled near $60,000, with investors turning their focus to ethereum and other alternative cryptocurrencies.
The second leg lower began on May 12, with prices falling by 12% to sub-$50,000 on the back of dour mood in traditional markets and electric auto company Tesla’s decision to suspend payments in bitcoin.
The selling pressure strengthened over the weekend, with some investors speculating Tesla may be selling its bitcoin holdings. The company sold 10% of its stash in the first quarter, having purchased $1.5 billion worth of coins in February.
Tesla CEO Elon Musk attempted to calm market nerves early Monday with a Twitter announcement, saying the company hasn’t sold its bitcoin holdings. The declaration appeared to put a floor under the sell-off, and prices briefly traded back up to around around $45,000.
But as of press time, the rebound had lost steam, with bitcoin falling back to $42,544, close to the day’s lows.
In traditional markets, a drop of 20% or more from highs is said to confirm a bearish shift in the broader trend. However, the conventional bear market definition does not hold ground in cryptocurrencies, where pullbacks of 30% or more are pretty normal during a bull run.
Analysts remain confident the pullback would recharge engines for a more robust rally.
“After the weekend FUD fest and s–t fighting, let’s get back to the important stuff. BTFD,” Raoul Pal, CEO and co-founder of Real Vision Group, tweeted. “BTC is forming a wedge most likely … perfectly normal correction and healthy.” A wedge, in this case, is a bullish pattern in price charts.
However, a V-shaped recovery may not happen due to renewed fears the U.S. Federal Reserve will unwind easy monetary policy sooner than expected to control high inflation.
“On a more material note, we think last week’s high inflation print might have seriously knocked the wind out of exuberant markets for a while,” Singapore-based QCP Capital noted in its Telegram channel. “We are very cautious of a gap toward $35K level. Especially if this triggers a widespread deleveraging cycle.”
