Bitcoin rallied almost 160% in 2023 and has gained 50% in the last six months, largely in anticipation of the U.S. Securities and Exchange Commission approving an ETF. The price surge took many HODLers – slang for long-term investors – into the black.
El Salvador, for instance, recently reported a $13 million profit on its bitcoin investment thanks to the rally.
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However, CryptoQuant analysts warned in a recent report that high unrealized profits amongst bitcoin holders raise the risks of a sharp price decline. That's even as rising demand for the Grayscale Bitcoin Trust (GBTC), which has applied for approval to convert to an ETF, narrowing discounts between the GBTC share price and its net asset value, and increasing trading volumes indicate strong anticipation for the spot ETF approval.
One scenario CryptoQuant lays out is if bitcoin reaches $48,500, the average unit price of those holding crypto for between 2-3 years, a market correction is likely to occur, with potential support levels at $34k and $30k, the research firm wrote in a post. A correction is often considered to be a decline of between 10% and 20%.
CryptoQuant said that the next resistance point for bitcoin, using network valuation metrics known as the Metcalfe band, is at $55,000.
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