Bitcoin is rallying towards the $64,000 mark, sparking anticipation of a potential record high, but traders are preparing for a bumpy ride ahead. After a volatile trading session that saw Bitcoin briefly spike to $63,968 before a rapid pullback, the cryptocurrency is showing signs of recovery, rising as much as 5.12% to $63,649.
The recent surge is attributed to substantial net inflows into US Bitcoin exchange-traded funds, surpassing $7 billion this week. This momentum invites comparisons to the environment preceding Bitcoin’s all-time high of nearly $69,000 in November 2021, raising questions about whether the current rally marks the beginning of a new bull market for cryptocurrencies.
However, concerns linger about the limited supply of Bitcoin available for purchase in the open market, with over half of all circulating Bitcoin tokens remaining dormant for more than two years, according to Glassnode data. Despite worries about a potential liquidity crisis, some industry experts suggest that fears might be exaggerated, noting that short-term holders are already starting to offload positions.
Stephane Ouellette, CEO of digital-asset platform FRNT Financial, remarked, “We have a long way to go between now and when we get to a full bull market, but it does seem like this concern that the market will break due to a liquidity crisis is not necessarily the case.”
Nonetheless, indicators hint at a possible pause in momentum. The unrealized profit margin of short-term Bitcoin holders, often frequent traders, has reached extreme levels after the recent rally, with a margin above 40% signaling a potential price correction, according to CryptoQuant.
Adding to the caution, the cost of opening new long positions in Bitcoin’s perpetual futures market has surged to its highest level since April 2021. CryptoQuant suggests that historically, when the cost of opening long positions becomes excessively high, Bitcoin prices tend to either stall or experience a correction. Traders are closely watching these signals amid the ongoing Bitcoin surge.
