Traders say Bitcoin price ‘needed pullback’ to maintain bullish momentum

Bitcoin’s parabolic increase well above its previous all-time-high has many experiencing déjà vu from 2017 and a number of analysts are concerned the market is overdue for a sizable correction.

On Jan. 8 With Bitcoin (BTC) price reached a new all-time high at $41,940 and this week’s 28% collapse to $31,076 had professional and retail investors afraid that a strong trend reversal was in the making.

BTC/USDT 4-hour chart. Source: TradingView

Bitcoin’s historical data shows that rapid parabolic ascents are usually followed by equally catastrophic corrections like the one seen after the 2017 bull run. Because of this, the current market’s similarities to the euphoric mania of 2017 to 2018 bull run have not gone unnoticed.

Cane Island global macro investment manager Timothy Peterson recently pointed out that:

“Bitcoin’s risk is approaching 2017 levels. Investors that buy at this price can expect to lose 40% of their investment sometime in the future. However, the typical maximum drawdown is 30%, so this risk is only modestly elevated from the average.”

Bitcoin risk based on current valuation levels. Source: Twitter

In a follow-up private conversation with Cointelegraph Peterson noted that there remains a short term bull case for Bitcoin stating:

“For bitcoin’s valuation to reach 2017 levels, it would have to be at least $80,000. There’s a small chance that would happen, and if it did, it would happen quickly. High prices have a tendency to move even higher.”

Popped bubble or lower support retest?

There are some telltale signs that Bitcoin’s quick gains reflect a manic market on the verge of a correciton and the current bull versus bear debate centers around whether this week’s volatility is a healthy pullback to test lower supports before the price initiates the next move higher.

LookIntoBitcoin founder and Decentrader analyst Philip Swift recently made the case that Bitcoin’s recenet price action reflected a “needed pullback/slowdown” and he…

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