Investors should tread carefully in March after bitcoin's explosive rally to $60,000

Published Sun, Mar 3 20247:02 AM ESTUpdated Sun, Mar 3 202411:38 AM EST

With bitcoin on a hot streak this past week, investors should brace themselves for a cooling in March. The flagship cryptocurrency exploded in the final week of February, which ended as the best month since 2020 . It started the week around $50,000 on Monday and leapt above $62,000 by the end of the week —just 10% below its November 2021 all-time high of $68,982.20. "The recent price action seems too quick and too big to sustain over the next month," said Yuya Hasegawa, crypto market analyst at Japanese bitcoin exchange Bitbank. "But cash inflows into spot bitcoin ETFs are accelerating, and that seems to have been overpowering those technical signals." More volatile price action combined with an increase in trading volumes is a recipe for trend reversal, and analysts say that traders should exercise some patience and caution in coming weeks. "In the very short term, the price may go even higher, but soon it will likely become difficult to continue as the market starts to grow a sense of caution, so we should tread carefully into March," Hasegawa added. Data from CryptoQuant shows unrealized profit margins are approaching extreme levels after last week's rally. That indicator — currently at 32% — signals a price correction when it reaches about 40%, according to CryptoQuant's head of research Julio Moreno. Although Bitcoin traded above $62,000 to end the week, it's realized price was down at the $42,000 level, according to CryptoQuant. That's the same level where JPMorgan on Thursday suggested bitcoin could fall to "once bitcoin-halving-induced euphoria subsides after April." CryptoQuant also showed the cost of opening new long positions in the futures market spiked in the recent rally, which historically signals a coming correction in the bitcoin price. Additionally, March tends to present seasonal risks in traditional capital markets and crypto may not be immune from them, said David Duong, head of institutional research at Coinbase. For example, some people take profits around this time in order to make tax payments, he pointed out. At the same time, bitcoin long-short ratios indicate bitcoin could still push higher, he added. "March will then mean grinding in a sideways pattern within a tight range before we see the next leg higher," he told CNBC. Hasegawa noted that the end of the Federal Reserve's Bank Term Funding Program on March 11 and the current worries surrounding New York Community Bancorp could cause some price action in March. "There still is a contagion risk for smaller regional banks … Another banking crisis could eventually lead the Fed to introduce a brand new liquidity injection program, but if the crisis gets big enough to make the equity market nervous, it could also affect the crypto market," he said. Last year, the regional banking crisis served as bitcoin's first big catalyst of the year, sending bitcoin up some 30% in March 2023. Bitcoin has fallen in six of the last 11 March's, and although it has had an average return of 13% for the month, that's skewed by a 173% gain in 2013, according to CoinGlass. Ether, however, has ended the month higher in six of the last eight March's since its inception, with an average gain on the month of 25%. Bitcoin's setup for the year is still strong, with demand spurred by newly launched ETFs expected to continue building while bitcoin supply tightens at the April 22 halving . Despite some price chart resistance in March, Duong said the cryptocurrency could reach a fresh record sooner than anyone anticipated coming into 2024. "The possibility of reaching all-time highs is likelier in the first half of the year than I thought it was," said Duong. "I thought that this would happen in 2024 but that it would be after we really started seeing a lot of the wirehouses [and] large broker dealers start to include [bitcoin ETFs] in their model portfolios, allowing their clients to actually hold this stuff. The fact that it's happening now already is pretty surprising." —CNBC's Michael Bloom contributed reporting