Bitcoin BTC -2.72% continues to face price correction risks due to sell pressure from short-term holders and the illiquid market environment during the holiday season, an analyst said.

"We expect more drawdown if short-term holders and retail leverage continues to play a dominant role in the market and cause a continued pullback on a relatively illiquid holiday season market environment," Bitfinex Head of Derivatives Jag Kooner told The Block.

Bitcoin price correction risks

According to Kooner, bitcoin is at risk of a price correction above the $44,000 mark. The analyst said that this level serves as a profit realization point for medium-term holders — individuals who have maintained their bitcoin holdings between 18 and 24 months.

The Bitfinex analyst added that profit-taking by the short-term holder cohort was a major cause of the recent retracement in the bitcoin price. "Short-term holder profits got overheated, which resulted in our current slump," Kooner said.

However, according to a recent Bitfinex report, there have been 67 consistent days of bitcoin net realized profitability for all bitcoin holder cohorts. "This is the longest streak of realized profits since the period from October 2020 to February 2021, such streaks usually lead to market corrections in bull markets," said multiple Bitfinex analysts in the report.

In the report, the analysts added that based on historical market behavior, the entire cryptocurrency market could see pullbacks before climbing to a high of $3.2 trillion by the end of 2024. "Current bitcoin valuations imply that the market environment is analogous to the period around June 2019 and July 2016, which saw initial dips in price before sustained recoveries. We expected a pullback to occur post bitcoin tagging the $44,000-$45,000 zone and why we expect prices to range further at these prices or pullback instead of an immediate move upwards," they added.

The world's largest cryptocurrency by market capitalization traded flat over the past 24 hours to change hands at $42,898 at 8:00 a.m. ET, according to The Block's Price Page.