Bitcoin Sell-Off Played Down as Healthy Correction

• Market sentiment soured as Bitcoin experienced an 8% drawdown.
• The sell-off was labeled as expected following Bitcoin’s recent strong run of form.
• Some analysts have warned that further drops are on the cards.

Bitcoin experienced an eight-week boom culminating in a new yearly high of $45,000 on December 5. This led to a surge in positive market sentiment , with some convinced that the crypto supercycle was well underway. 

However, the market experienced an 8% downside swing early Monday morning (UTC) with support at $40,300, leading to some second-guessing whether the bull market is here. In response to the sentiment change, some analysts quickly stated that the sell-off was expected.

Bitcoin Sell-Off Is Normal

Several analysts have commented on the recent Bitcoin sell-off, with some suggesting that it is a normal occurrence. Will Clemente, the co-founder of Reflexivity Research, stated on Twitter, “BTC just doubled in 2 months with no pullbacks; a correction is not that surprising.” Clemente added that this was necessary to shake out weak hands and overleveraged traders, which is essential for Bitcoin to take the next leg higher.

On-chain analyst Willy Woo echoed Clemente’s outlook, stating that short-term declines are often just random oscillations in the direction that liquidates the most overleveraged traders. Despite this dynamic, Bitcoin’s long-term trajectory is still determined by adoption curves, which he remains optimistic about.

While the likes of Clemente and Woo maintained a constructive outlook on the sell-off, other voices warned of the potential for further downsides. 

Downside Potential 

Despite Clemente and Woo’s attempt to steady the change in market sentiment, others warned to prepare for the possibility of further losses ahead. Crypto trader Mister Crypto expressed the view that the sell-off is not necessarily over. Nonetheless, taking a macro perspective, Mister Crypto called this a potentially enduring down phase “a pitstop for a HUGE bull run.”

Similarly, Tuur Demeester, the founder of Adamant Research, has warned that bull market corrections typically run between minus 20-30%. This implies that the recent drop may reassert itself to print further lows past Monday’s established $40,300 support line.

On the Flipside

• Bitcoin has seen much larger percentage drawdowns during bull cycles. This latest sell-off is par for the course in such a volatile asset.
• Fundamentals concerning the spot Bitcoin ETF and upcoming halving remain unchanged.

Why This Matters

Although the recent Bitcoin sell-off has been painful for overexposed long traders, it ultimately keeps Bitcoin’s bull market on solid footing. With leverage flushed out and expectations realigned, analysts forecast that the stage is set for continued incremental adoption and further price rises in the longer term.

Read more about VanEck naming its spot ETF ticker “HODL” here:
VanEck Bitcoin ETF $HODL Ticker Stands Out Amongst Its Peers

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