Recently, we have voiced our concerns about the excessive use of leverage in the crypto market. Just last week, traders were facing annual rates of up to 150% to maintain long positions in Bitcoin on the perpetual market. By the end of the week, it became evident that this approach was unsustainable, leading to a significant market correction and extensive liquidations in the futures market. At the same time, the Coinbase Premium Index now shows less euphoria among institutional and retail investors.

However, it is premature to declare the end of the crypto bull market. This situation largely mirrors past corrections within bull markets, triggered by over-optimism and excessive leverage. There is little evidence to suggest that this correction marks the beginning of a new market environment. The outlook remains positive with several favorable factors still in play, such as the evident Bitcoin halving, continuous strong ETF inflow, increased liquidity, and the potential Ethereum ETF.

It seems that many Bitcoin holders have capitalized on this correction to secure profits, which was a matter of time given the impressive rally since last autumn. We anticipate a period of sideways movement for Bitcoin and Ethereum in the coming weeks, as the market finds an equilibrium, rather than the further 20% drop that the crypto internet crowd are predicting, before continuing up again.