Key Points
- Bitcoin’s demand growth and ETF inflows slowed down in April, causing uncertainty among investors.
- On-chain metrics indicate a potential major correction for Bitcoin, possibly leading to a 20% drop in prices.
Bitcoin’s [BTC] growth in demand and ETF inflows experienced a slowdown in April. Despite this, BTC ETF inflows still reached an impressive $555 million on a month-to-date basis.
The stagnation in BTC movement has led to doubt among investors.
Dip in Demand and Potential Correction
Last week, $84 million flowed out of U.S. spot Bitcoin ETFs, resulting in a 22% drop in assets under management (AUM) of Bitcoin-linked funds.
According to two on-chain metrics, we could be facing a significant correction. A CryptoQuant Insights post combined the MVRV ratio with Bollinger Bands to theorize a 20% correction for Bitcoin.
Bollinger Bands are a mean reversion indicator, suggesting a movement toward the mean when the band’s extremes are breached. The post pointed out that the upper band was recently breached, but the MVRV ratio was back within the bands, implying a potential drop to the 365-period moving average.
Profitable Market Participants
The Spent Output Profit Ratio (SOPR) shows how profitable market participants are. Despite the recent selling pressure, BTC holders are still making a tidy profit. The current situation is similar to the SOPR peak in July 2019, but the circumstances are different now.
The drop in SOPR could also suggest a temporary top for Bitcoin. The market might need time to consolidate and absorb the selling pressure from fearful participants and profit-takers. This scenario aligns with what the MVRV Bollinger bands signal.
