Bitcoin (BTC) Price Rebounds Above $20,000, Is This A Real Trend Reversal or Dead Cat Bounce?
After a brutal crash under $18,000 over the last weekend, the world’s largest crypto Bitcoin (BTC) has registered a healthy bounce back reclaiming $20,000 levels earlier today, June 20.
This comes as a major relief to investors as Bitcoin has been on a free fall over the last two weeks. As of today’s price, Bitcoin is still trading at a 70% discount from its all-time high and more than 55% discount year-to-date.
The bigger question among investors’ mind is that whether $18,000 marks the bottom for Bitcoin and is this pullback a trend reversal. On the technical charts, Bitcoin falling under its 200-day moving average (DMA) drives a negative sentiment.
However, the recent move looks more like a “dead cat bounce” instead of a trend reversal. To claim a trend reversal, the Bitcoin (BTC) price will have to cross $23,000 on a daily basis. Even as of now, BTC has been flirting around with $20,000 and not able to convincingly hold above it.
There have been two big reasons behind Bitcoin’s latest price crash. First is the uncertainty in the global macroeconomics which is driving the risk-ON assets lowers. The U.S. is currently facing a four-decade high inflation and the Federal Reserve has turned extremely hawkish with its quantitative tightening (QT) monetary policy.
Fed Chairman Jerome Powell has vowed to control inflation at any costs. Well, this has led to the fear that the interest rate hikes could have a very negative impact on the U.S. growth rate pushing it into recession.
As the U.S. equity market heads lower, this also creates pressure on the crypto space. However, Bitcoin and the broader crypto market has corrected faster than the U.S. stock indices this month. So far in June 2022, the Nasdaq 100 has corrected 12%. On the other hand, Bitcoin has corrected by 36% during the same period.
But another major issue plaguing the crypto market is the liquidation of major institutions. After the Terra collapse, crypto lending Celsius Networks has been facing major challenges with liquidity issues. As a result, several lenders had to liquidate their positions.
No one knows where the Bitcoin bottom lies, but we may not be out of the woods yet. Binance CEO Changpeng Zhao said” “Historically speaking, if you bought Bitcoin every time there is a “bitcoin is dead” headlines, you would have done well. Logic: when they lose hope, that’s when the bottom is in.”