Bitcoin's Mid-Cycle Pullback: History Repeating?

Bitcoin's price performance since President Donald Trump's inauguration has sparked debate among market commentators, with some calling the top of the BTC cycle. However, Chris Burniske, a former Ark Invest crypto executive and current VC partner at Placeholder, believes that the market is currently in a "mid-bull pullback" and has not yet peaked. He compared the current situation to the market conditions in April, May, and June of 2021, when prices fell by 50-80% for some coins, but the market ultimately rallied in the second half of the year.

According to a chart, Bitcoin dropped from $64k to $30k in the first half of 2021 but later rallied to a high of $69k in the second half. Whether history will repeat itself remains to be seen. A key valuation indicator, Short-Term Holder (STH) MVRV, supports Burniske's projections. CryptoQuant's Axel Adler also noted that the market may be exiting a local overheated phase, as the STH MVRV has dropped from 1.35 to neutral levels. Adler stated that an STH MVRV above 1.30-1.35 typically signals an overheated market, often leading to sell-offs. The decline in the indicator suggests that some short-term holders have exited their positions, signaling the end of a local overheated phase.

The STH realized price (RP), or the average price cost of BTC acquired over the past 1-3 months, is currently at $96K. Historically, the STH RP has acted as either support or resistance. A sustained price drop below this level could trigger panic among short-term holders and prompt them to sell at a loss. Conversely, a rebound on the STH RP as a support could sustain the uptrend. Over the past few trading days, Bitcoin has attempted to hold above $96k after a sharp drop to $91k on 3 February. Additionally, Bitcoin network activity has declined to yearly lows, suggesting that BTC could be overvalued. If repriced, BTC could either hold $96k or drop lower, but still provide new buying opportunities if the retracement extends to range lows.