Key Points
- Bitcoin’s bullish sentiment has spiked, but analysts warn of a potential bearish head and shoulders pattern.
- Despite the inflow of ETFs, market corrections are following Bitcoin’s bullish sentiment with the MVRV ratio showing balanced market conditions.
Bitcoin [BTC] has recently undergone a market correction after a period of bullish sentiment. This shift in market sentiment was observed by market intelligence platform Santiment, which noted a growing optimism towards Bitcoin.
Despite this optimistic outlook, concerns have been raised about a potential market top, which often leads to price corrections in the cryptocurrency space.
Price Corrections and Volatility
Bitcoin’s price experienced a drop from $65,664 to $63,243 on Monday, a result of panic selling. Santiment cautions that if the current fear of missing out (FOMO) morphs into fear, uncertainty, and doubt (FUD), Bitcoin’s market could see heightened volatility.
Historically, the market has moved against crowd expectations, suggesting a potential continuation of this correction.
Rising Sentiment and ETF Inflows
Santiment’s analysis from last Friday showed growing confidence among Bitcoin traders, following a 22% price surge over the previous three weeks. The sentiment ratio, which tracks the balance between bullish and bearish posts about Bitcoin, revealed a significant rise in optimism.
However, excessive confidence often precedes market downturns, as traders may become overly optimistic.
Simultaneously, Bitcoin exchange-traded funds (ETFs) have seen massive inflows. As reported by Lookonchain, on the 30th of September, Bitcoin ETFs experienced 7,111 BTC in net inflows, equivalent to approximately $453.42 million.
These institutional inflows occur as market participants await the U.S. Securities and Exchange Commission’s (SEC) decision on pending applications for spot Bitcoin ETFs.
Moderation in the Market
The MVRV ratio, which compares Bitcoin’s market value to its realized value, currently stands at 1.85. This indicates that Bitcoin is trading above its realized value but is not in an overheated or undervalued state.
Historically, peaks in the MVRV ratio have marked Bitcoin price tops, such as during the bull markets of 2013, 2017, and 2021. These periods were followed by sharp corrections and bear market phases.
The current ratio of 1.85 suggests the market is in a balanced state, with potential for either continued correction or recovery, depending on future sentiment shifts.
A recent report from AMBCrypto highlighted concerns raised by a crypto analyst known as Ash Crypto. The analyst pointed out a multi-year bearish head and shoulders pattern on Bitcoin’s chart that has been developing since 2021.
The coin’s price is nearing the neckline support of this pattern, and failure to hold this support could result in a substantial price drop.