Bitcoin In Strong Correction, But Analysts Remain Optimistic

For a few weeks now, Bitcoin has been rocking. A 22% drop since its historic peak of $109,000 in mid-January fuels doubts. Is this the end of a four-year cycle, deeply rooted in the DNA of the crypto market, or just a simple turbulence before a new surge? Analysts lean towards the latter option, but the nuances deserve to be explored.

A jolt, not a collapse

The figures are scary, but history reassures. Bitcoin has experienced far more violent corrections in its previous cycles. In 2017, a 40% drop over two weeks did not prevent BTC from multiplying its price by six in a year.

Today, the current decline fits into a similar dynamic: a “shakeout,” that is, a brutal purge to eliminate fragile positions.

Technical indicators, although bearish in the short term, do not overturn the structural trend.

The key support between $72,000 and $73,000 remains solid, according to Bitfinex. Most importantly, the four-year cycles, marked by halvings (halving of mining rewards), have always been bullish catalysts. The latest one, in April 2024, has already propelled the price by 31%. The mechanics seem intact.

Nevertheless, a new element is clouding the picture: institutional adoption. Bitcoin ETFs have injected more than $125 billion, creating an unprecedented structural demand.

These flows, less sensitive to the emotions of retail investors, could mitigate cyclical shocks. “The conventional cycle is ceasing to exist,” some analysts dare to say.

Threats to the Bitcoin cycle

While the scenario of a simple adjustment seems credible, risks persist. Bitcoin no longer evolves in a closed vase.

Its correlation with the S&P 500 and Treasury yields has strengthened. A stock market crash, fueled by trade tensions or a rise in interest rates, could therefore drag BTC down with it. The $84,000 reclaimed in mid-March does not guarantee immunity.

Another thorn: Bitcoin’s CAGR (compound annual growth rate) over four years has plunged to 8%, a historical low.

For Iliya Kalchev from Nexo, this figure raises questions about the sustainability of the four-year cycle. Institutions, by absorbing an increasing share of the supply, may be accelerating the market’s maturation… to the detriment of its historical jolts.

Finally, geopolitical shocks — trade wars, monetary crises — could weigh on sentiment. If investors flee to traditional safe-haven assets, Bitcoin, still perceived as risky, could suffer temporary distrust. The “extreme fear” currently, measured by sentiment indices, reflects this nervousness.