The Euphoria Phase of Bitcoin: Is It Fading?

The Euphoria Phase of Bitcoin: Is It Fading?

Bitcoin has recently broken below the $60,000 support level for the first time in two months. This comes after a period of euphoria surrounding the world’s largest digital asset, particularly following the launch of Spot Bitcoin ETFs in the US market. According to a report from Glassnode, an on-chain analytics firm, the euphoria phase that has been active for the past 6.5 months appears to be fading. Additionally, the distribution of Bitcoin has entered into the fear zone, with investors heavily weighted towards selling. This shift in sentiment has led to a decline in the price of Bitcoin by more than 18% from its all-time high of over $73,737 in March 2024. The increase in the percentage of addresses holding losses suggests a growing selling pressure on the market, as the percentage of addresses making a profit has dropped to 86% at the time of writing.

Glassnode’s recent report highlights the consolidation action in the Bitcoin market. The Net Unrealized Profit & Loss (NUPL) metric indicates that Bitcoin entered a euphoria mode early in this cycle, compared to previous cycles. The NUPL crossed over 0.5 approximately 6.5 months before the recent halving event, which occurred amidst excitement surrounding Spot Bitcoin ETFs. This is in stark contrast to the 2021 market cycle, where the NUPL did not reach a profit zone until 8.5 months after the halving. While the market has been in a euphoric phase for the past seven months, the recent correction has cooled off some of that enthusiasm. Notably, there has been a noticeable increase in net outflows across all wallet sizes in April, signaling a shift in sentiment among traders towards selling pressure. Short-term holders have been experiencing losses since March at the 90-day +1 standard deviation level, further adding to the selling pressure in the market.

Despite the fear rating among investors, a pullback after a significant price rise like Bitcoin’s is generally considered healthy by most crypto analysts. Many long-term holders are still holding onto their positions, anticipating the effects of the halving event. At the time of writing, Bitcoin is trading at $59,899, down by 5.35% in the past 24 hours. Considering that the current cost-basis for short-term holders is at $66,700, with a realized price of $59,800, more holders in this cohort may have entered into the loss zone. Crypto analyst Ali Martinez suggests that $59,800 is a key price level to watch, as historical data indicates that Bitcoin tends to bounce back above the short-term holder realized price in such situations.

The recent shift in sentiment in the Bitcoin market from euphoria to fear has raised concerns among investors. The increased selling pressure and growing number of addresses holding losses indicate a potential downturn in the market. However, some analysts view this pullback as a healthy correction following a period of significant price rise. It is essential for investors to conduct thorough research and analysis before making any investment decisions in the volatile cryptocurrency market. Remember, investing carries risks, and it is crucial to understand the implications of market trends and price movements before taking any action.

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