Bitcoin Investors Warned of Potential Price Correction Before $70K
The Essentials in Brief
Bitcoin investors may need to be patient before they can experience the leap over the $70,000 mark. Recent analyses suggest that the Bitcoin price could undergo a correction before further recovery. This is evident from the current trend of the Coinbase Premium Index, which signals a reduced buying momentum in the US. In addition, the negative Sharpe Ratio indicates that the short-term profit prospects for Bitcoin are currently not particularly promising.
Insight into the Coinbase Premium Index
The Coinbase Premium Index, an indicator of US investor buying behaviour, is currently showing a decline. A lower value indicates an increase in sales, suggesting that major players in the market are reducing their Bitcoin holdings. According to an analysis by CryptoQuant, the index was last at -0.050, a clear signal of a selling tendency among US Bitcoin holders.
What does the Sharpe Ratio say?
The Sharpe Ratio is a measure of the risk-reward ratio of an investment. A positive value indicates that the potential returns could outweigh the risk taken. In contrast, a negative Sharpe Ratio, like the current value of -2.22 for Bitcoin, signals that the potential gains do not justify the risks. This suggests a risky phase for Bitcoin investments.
The Importance of Total Supply Profitability
Another important indicator is the percentage of the total supply of Bitcoin that is currently in profit. With a current value of 87.03%, a reduction in this percentage may be necessary for a significant recovery in the Bitcoin price. Historical data shows that a drop to about 78.20% could be a potential turning point for a positive price development.
Influence of Coin Circulation
The daily circulation of Bitcoin is also an important factor for price development. A decrease in the number of coins in circulation can be an indicator of decreasing market activity. If circulation increases, this could lead to further price corrections.
Our Assessment
Although the current price increase of Bitcoin may be optimistic, the analyzed indicators suggest that caution is advised. The negative Sharpe Ratio and the signals from the Coinbase Premium Index point to potential risks and a possible short-term correction. Investors should consider these factors and possibly adopt a wait-and-see attitude before making further investments. As always, it is important to closely monitor market developments and make informed decisions.
Sources: CryptoQuant, Messari, Santiment
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