Big Investors Buy the Dip, Bitcoin Correction Risk Remains
On Tuesday, the financial market saw a broad rebound as investors bought the dip during the pullback. Both U.S. stocks and cryptocurrencies saw some recovery, although prices remained well below pre-selloff levels.
By the end of the day, the S&P, Dow Jones, and Nasdaq all posted gains of 1.04%, 0.76%, and 1.03%, respectively. Gold fell by 0.63% as safe-haven demand weakened.
According to Bitpush data, Bitcoin (BTC) climbed from the $54,000 support level to a high of $57,100 on Tuesday, regaining support at the low end of its trading range since the end of February. As of press time, Bitcoin is trading at $56,051, up 2.25% in 24 hours.
Altcoins saw double-digit recoveries, with all top 200 tokens by market cap, excluding stablecoins, posting gains.
Meme token Cat in a Dog’s World (MEW) showed the strongest rebound, rising 39.8% to $0.00568, Notcoin (NOT) increased by 30%, and AIOZ Network (AIOZ) went up by 27.9%.
The total market cap of cryptocurrencies is currently $2 trillion, with Bitcoin’s dominance at 55.9%.
Whales Buy the Dip
Blockchain analytics firm IntoTheBlock reported that Bitcoin whales (large asset holders) took advantage of the price drop to increase their holdings, while small investors sold off in panic.
According to IntoTheBlock analysts, wallets holding 1,000 to 10,000 BTC, valued between $56 million and $560 million at current prices, “showed confidence during the recent drop, continuously adding to their holdings as prices fell.”
Meanwhile, wallets holding less than 1 BTC “performed weaker, with holdings dropping significantly during yesterday’s market slump.”
Data collected by Farside Investors showed that on Monday, U.S. spot Bitcoin ETFs saw net outflows of $168 million, concentrated in Grayscale’s GBTC, Fidelity’s FBTC, and 21Shares/Ark Invest’s ARKB, while inflows into competitors were modest or flat.
Bloomberg senior ETF analyst Eric Balchunas noted that the outflows represent only 0.3% of the ETFs’ total assets under management. Additionally, he mentioned that the largest BTC spot ETF, BlackRock’s $18 billion IBIT, did not see any net outflows.
Need to Reclaim $59,000 Support
Market analyst Bloodgood stated on X, “A lot has changed over the past two weeks. If we were previously discussing whether BTC would break $69,000, we’re now focused on whether the $51,000 level can hold. Due to market turmoil, Bitcoin has dropped 30% in the past two weeks.”
He added, “However, we’re not interested in the fundamentals for this part; we’re looking at the charts. The bottom formed just below $50,000, and a rebound is underway. If we want to see a quick continuation of the rebound, we need BTC’s weekly chart to close above the key weekly level of $59,000. Otherwise, we could soon see levels below $50,000.”
Bloodgood noted, “Since Bitcoin failed to make a higher high on the weekly chart, we now have three lower highs and three lower lows, indicating that we are still in a downtrend. Unless this changes, I won’t be confidently looking for longs and will continue to wait until the trend reverses.”
Regarding Ethereum’s trend, Bloodgood believes, “Similar to BTC, ETH needs to reclaim $2,600, which is the key level to push ETH towards $4,000. If this doesn’t happen, we might see it test $2,000. On the other hand, breaking this level would take ETH to $2,800 and then $3,300.”
According to Tuesday’s CryptoQuant market report, BTC’s market value to realized value (MVRV) ratio has fallen below its 365-day moving average, historically signaling continued price declines. The report noted that the same key support was broken during the March 2020 COVID-19 crash, the May 2021 downturn, and the start of the bear market in November 2021.
Analysts added, “Investors should monitor these valuation metrics to assess the likelihood of a price rebound or further correction.”
CryptoQuant founder and CEO Ki Young Ju analyzed on X, “As long as Bitcoin can stay above $45,000, it may break its all-time high again within a year. Although some indicators now show bearish signals, a rebound is still possible, so it’s important to watch whether it holds this level for one or two weeks. If it stays for longer, the risk of a bear market increases, and if it stays for over a month, recovery may be difficult.”