Technical and On-Chain Factors Support Bitcoin Market Structure Amid Price Correction

Bitcoin has had a volatile start to the year, with its price correcting by 10% after rising almost 100% during early 2023, according to data from CryptoQuant. However, traders should remain calm, as there are still many technical and on-chain factors that support bitcoin’s market structure.

From a technical standpoint, bitcoin passed its critical inflection point at the beginning of 2023, where the descending and ascending trend lines met. This point acts as a technical watershed and defines the market from 2021 until the halving year of 2024.

Source: CryptoQuant

Furthermore, bitcoin has been able to rise above the realized price indicator, which represents the average price of all bitcoin purchases. This illustrates that average bitcoin buyers are making a profit on their investments, which is an encouraging sign for the market.

Bitcoin’s market behavior can be segmented into accumulation and distribution phases, which together form a multi-year series of cycles. Institutional money has traditionally favored accumulation cycles, while retail investors have been active in distribution cycles. Bitcoin’s history is also defined by halving events, which are always preceded by a pre-halving accumulation cycle.

Despite the falling spot price, bitcoin’s exchange stablecoin ratio (ESR) is currently acting as a leading indicator to bitcoin and other digital assets in correlation. The ESR and bitcoin’s spot price converged from 2021 to 2022, but last year’s selling pressure broke their correlation. However, in late 2022, the exchange stablecoin ratio began to pivot back towards new highs, and in the current market structure, the ESR acts as a magnet to bitcoin’s spot price.

In summary, despite the recent correction in bitcoin’s price, there are still many technical and on-chain factors that support the market structure of the leading cryptocurrency. The multi-year inflection point, realized price, growing ESR divergence, and pre-halving accumulation cycle all indicate that traders should remain calm and hold on to their investments.

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