Bitcoin (BTC) has reached a new year-to-date high, soaring past $42,000 on December 4, breaking through the upper limit of its trading range and recording its strongest monthly close since March 2022. However, analysts from cryptocurrency exchange Bitfinex warn investors to be wary of BTC's downside risk, as a breach of the asset's three-year Realized Price may result in market capitulation.

According to the Bitfinex Alpha report, the Bitcoin Realized Prices Spectrum is a significant metric for analyzing BTC market trends, revealing critical price levels for pullbacks. BTC's latest price surge has caused it to trade above all the markers of the realized price bands, including the prices of Unspent Transaction Outputs (UTXOs) aged less than one, two, three, five, and seven years.

The three-year band is currently around $31,000, and BTC has yet to retest it since the break up from it. Analysts believe a decline in BTC price below the three-year band could trigger a major correction, causing capitulation among investors who have held the asset for three years and possibly leading to a further drop in the short-term holder realized price.

Bitfinex further explained that although the perspective may seem "bleak," it is crucial to consider all possible outcomes for Bitcoin's price movement. An alternative scenario sees all realized prices on the metric, except the long-term holder realized price, aligning in an upward direction. Bitfinex attributed BTC's latest surge to a combination of factors, including significant buying activity in the market and a significant shift in the dynamics of the futures market compared to the spot one.