Cryptocurrency exchange Bitfinex has warned investors to exercise caution in their trading strategies as bitcoin (BTC) has entered a higher volatility environment.

According to the latest edition of the Bitfinex Alpha report, BTC’s recent ascent to the $38,000 range may not last for a while, as on-chain metrics show that the digital asset could retrace its steps and fall to the $31,000 range.

Investors Urged to Be Cautious

Bitcoin’s surge to the $38,000 level for the first time since May 2022 led to roughly $491 million in liquidations, the largest since the August 17 flash crash. While the asset has witnessed a remarkable price performance this year, it is important to judge its potential next move from past cycles.

Bitfinex said the key to understanding BTC’s price movements is the Short-Term Holder Realized Price (STH RP), which indicates the average purchase price by investors who have held the asset for 155 days or less. Comparing the STH RP with BTC’s price helps to determine investor profitability.

Bitcoin currently hovers around the $37,000 range while the STH RP is at $30,380, marking the widest gap between the two metrics since April 10, 2022. Historical cycles show that the month-over-month change in STH RP reaching a threshold of $2,000 is a sign of a local peak, which follows the recovery phase in bear markets.

However, if the market witnesses a negative monthly shift in Long-Term Holder Realized Price (LTH RP), long-term holders are also liquidating their bitcoin investments.

BTC’s Market Cap Close to $750B

Currently, the monthly positive change in STH RP and the negative shift in LTH RP suggest that the price of BTC has reached a local peak, and a retraction to test the STH RP level is expected. As the STH RP hovers around $30,380, BTC may pull back to the $30,000 to $31,000 range.

“At Bitfinex Alpha, we have been discussing the possibility of a new bull market, or the ending stages of a bear market, since December 2022 and throughout the rise we have seen in BTC since the beginning of the year. However, it is important to be cautious,” Bitfinex stated.

Notably, the STH and LTH levels can change as they are dynamic measures.

Meanwhile, BTC’s market cap is close to exceeding the $750 billion mark for the first time since April 2022, indicating a major milestone in the recovery of the leading crypto asset.