Bitcoin's Sharp Pullback: Normal Correction or Bull Run Warning?

The crypto market experienced a significant downturn this week, with Bitcoin (BTC) sliding from $123,200 to $116,600 and overall market capitalization dropping 3.7% to $3.65 trillion. Several altcoins took the hardest hits, including Pump (PUMP), Virtuals Protocol (VIRTUAL), SPX6900 (SPX), and Fartcoin (FARTCOIN), among others. This sudden reversal has sparked debate: is the bull run finally losing steam, or is this merely a healthy correction?

Why Are Traders Taking Profits Right Now?

The primary driver behind this week’s selloff is straightforward—profit-taking. When an asset rallies as aggressively as BTC has, pullbacks are inevitable. History shows this pattern repeatedly: Bitcoin reached $109,389 in January only to drop to $74,450 by April. These corrections are entirely normal in parabolic moves.

Another timing factor is what traders call “Crypto Week”—a pivotal moment where Congress will vote on three major bills including CLARITY, GENIUS, and a central bank digital currency (CBDC) measure. The GENIUS Act, already passing the Senate on a bipartisan basis, will regulate stablecoins. CLARITY aims to clarify which regulator (SEC or CFTC) oversees different crypto assets, while the CBDC bill limits the Federal Reserve’s involvement. Uncertainty over whether these bills will advance is causing traders to de-risk positions ahead of the vote. Markets hate uncertainty, and this “buy the rumor, sell the news” dynamic is playing out in real time.

The Technical Case Against an Immediate Bottom

On the chart, Bitcoin formed a textbook shooting star pattern on Monday—a bearish reversal signal characterized by a small body and extended upper shadow. This is a legitimate warning sign that buyers are losing momentum at these elevated levels.

Mean reversion is also at play. With BTC spiking above $123,000, it’s now significantly stretched above both the 100-day moving average ($103,000) and the 50-day average ($108,200). Mean reversion theory suggests the price needs to compress this gap, which could push Bitcoin lower before recovery accelerates.

What’s Next? The Break-and-Retest Setup

Here’s the silver lining: Bitcoin appears to be executing a classic break-and-retest (B&R) pattern. This involves pulling back to previously broken support levels—in this case, around $110,000—before resuming the uptrend. B&R patterns are continuation signals, not reversal signals, suggesting the bull run isn’t over.

The most probable scenario is that Bitcoin consolidates near $110,000, then reignites its advance once regulatory clarity emerges post-“Crypto Week.” Should this play out, we’d likely see a corresponding rally across altcoins as well.

Bottom line: This isn’t the end of the bull run—it’s a necessary reset. Traders should watch how BTC responds to $110,000 support as the key tell.