Bitcoin (BTC) experienced a rapid downward trend, hitting a low of $65,110 on Friday after briefly touching the $71,000 mark. The cryptocurrency market was taken by surprise as Bitcoin dropped to $67,553, marking a decrease of more than 5% in just 24 hours. Despite the sudden nature of this price crash, on-chain data had been signaling the possibility of increased volatility in the near term.
Crypto research firm Kaiko had noted on April 11 that expectations for volatility were on the rise. Implied volatility for future expiries in the following two weeks had surged from 59% to 71% within a span of two days. Additionally, two crucial indicators had been flashing warning signs since late March, signaling an impending correction. However, these signals may have been overlooked due to the prevailing market exuberance.
According to on-chain analytics firm CryptoQuant, two key metrics, traders’ unrealized profit margins and the realized price, had been indicating weakness for some time. As Bitcoin dropped below $66,000 for the first time since April 4, liquidations totaling $920 million were recorded in the past day. The market correction was not limited to cryptocurrencies alone, as S&P 500 and gold prices also retraced, hinting at underlying concerns related to CPI and inflation across different sectors.
The most recent Glassnode report highlighted that the market had entered a euphoric phase, with profit-taking activities on the rise. Despite Bitcoin being 8.32% down from its all-time high of $73,750 set in mid-March, the current euphoria phase is believed to be in its early stages. Previous cycles have shown that euphoria stages often witness significant price drops of more than -10%, with some even exceeding 25%.
The recent price crash in Bitcoin serves as a reminder of the importance of monitoring on-chain data and key market indicators to anticipate potential market movements. As volatility continues to be a defining factor in the cryptocurrency space, staying informed and cautious of warning signals can help investors navigate through uncertain market conditions more effectively.