Bitcoin at $105,000: Is This a Bull Market Correction or the Start of a Bear Market?

Bitcoin BTC/USD is experiencing its first significant correction in almost two months, retreating from a record high of $111,880 due to increasing macroeconomic uncertainty and extraordinary leverage in the derivatives sector.

What Transpired: This pullback signifies a critical moment for investors. Heightened selling pressure, profit-taking by experienced holders, and increasing options activity suggest that volatility may rise in the near term.

The correction aligns with escalating macroeconomic risks and more aggressive positioning in the derivatives market.

A key factor was an unexpected legal ruling in the U.S., where the Court of Appeals temporarily suspended a decision opposing government-imposed tariffs.

This move led to a surge in 30-year Treasury yields breaking above 5%, resulting in a broad sell-off across risk assets, including cryptocurrencies.

Bitcoin’s options market illustrates this apprehension.

BTC options’ open interest reached a historic $49.4 billion, as reported by Bitfinex Alpha, emphasizing the increased institutional engagement and rising demand for both speculative plays and downside protection following the recent all-time high.

Also Read: Anthony Scaramucci Remarks That Sam Bankman-Fried’s 25-Year Sentence Is ‘Excessive’

Why This Matters: On-chain metrics provide further reasons for caution.

The Relative Unrealised Profit index has surpassed +2 standard deviations, a level historically linked to short-term market tops and intra-day fluctuations.

According to analysts at Bitfinex, this indicates a market entering an overheated state, partly driven by profit-taking from long-term holders.

Disclosure: 82% of retail CFD accounts incur losses.

Wider macroeconomic indicators also signal caution. U.S. consumer spending saw a significant decline in April, as households opted to save amidst inflation and anticipated tariff-related expenses.

Imports dropped nearly 20% during the same month, reducing the trade deficit by 46%. However, corporate inventories and capital goods orders remained lackluster, indicating a diminished appetite for investment.

Labor market statistics offer little reassurance. Jobless claims are at their highest level since 2021, and corporate earnings fell in the first quarter.

Business confidence has waned, and hiring plans are being curtailed.

Even a temporary detente between the U.S. and China has not restored durable confidence.

Despite the downturn, crypto adoption is gaining traction within traditional finance.

Meme-stock leader GameStop GME has allocated $513 million to Bitcoin as part of a strategic diversification strategy.

While this move is noteworthy, it has raised concerns among investors regarding the firm’s limited expertise in crypto and the asset class’s inherent volatility.