With Bitcoin rising above $70,000, the market entered a euphoric phase in which all coin holders were in the black. In the history of cryptocurrency, this is the fourth cycle that's seen the repetition of the same patterns.
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This is primarily a matter of wealth distribution. After hitting an all-time high, long-term holders (LTH) are starting to sell off their reserves, while short-term holders (STH), on the other hand, are only whetting their appetite.
LTHs' reserves peaked in November 2023, and since then, their cumulative volume has fallen by 660,000. BTC. Meanwhile, STHs added 810,000 BTC to their reserves. The excess is due to a reduction in cryptocurrency exchange reserves, which are not accounted for in the cohort analysis. This distribution trend is shown time after time when the price sets a new high.
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Second, the euphoria phase is characterised by an increase in speculative interest and fear of missing out (FOMO) on profit. This leads to a significant preponderance of buyers in the futures market, where the funding rate rises well above average values.
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Typically, increased speculative activity is followed by the increased volatility and strong sudden corrections so typical of cryptocurrencies. This time, however, the bulls have exchange-traded funds on their side. The ETFs buy an average of $250 million worth of Bitcoin every day. This leaves no chance for the bears to try to ride other participants' excessive optimism.
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If market trends continue, a supply shock is expected due to significant demand from buyers and a lack of willingness on the part of sellers to part with the cryptocurrency at current prices. The situation will worsen after the halving event when the coin's issuance will be halved. Most forecasts agree that Bitcoin will exceed the $100,000 mark as early as this year.
StormGain Analytical Group
(platform for trading, exchanging and storing cryptocurrency)