Altcoins experienced a relief rebound on May 13, as the panic sparked initially by Terra’s UST crash and multiple stablecoins losing a dollar peg began to subside. Risk-loving traders seek out assets trading at yearly lows.
Everyday cryptocurrency market performance. Source: Coin360
Despite the large correction over the last week, Bitcoin bulls managed to return to the $30,000 area, which was defended many times during the 2021 bull markets.
Below is a list of what analysts think about Bitcoin’s future as it attempts to recover from multiple headwinds.
Is there a short squeeze?
Coinalyze, a cryptocurrency analytics platform that provides insight into the minds and actions of derivatives traders, provided insights by assessing Bitcoin long to short positions on ByBit for BTC/USD perpetual contract.
BTC/USD perp 1-day chart, vs. long/short BTC/USD account ratio. Source: Twitter
The chart shows that short interest, represented in red in the lower half, has risen during the recent market downturn, indicating that derivatives traders anticipated more downside in the near term.
“Sentiment was very negative in the last few days as shown by ByBit short/long ratio and funding rate. “A short squeeze/bounce can be expected,” Coinalyze founder Gabriel Dodan said to Cointelegraph in private comments.
Short-term breakout up to $35K is possible
Bitcoin’s May 12 dip to $26,716 was noteworthy because it fell below the May 2021 low of $28,600. ExoAlpha managing partner David Lifchitz said that this was “a last man standing for BTC”.
Lifchitz believes that the bounce on May 13 was normal because “a lot of negative news had been flushed” and the “panic move by the UST fiasco have already occurred.”
Lifchitz said that Bitcoin at the May 2021 lows “seems to be a good entry point with a tight stop should this purge continue”, but traders shouldn’t expect a quick return to $60,000 and should instead set a modest, short-term target of $35,000.
“Long at $28.5K/Stop at $26.5K/Profit Target at $34.5K = $6K Upside / $2K Downside = 3/1 Win/Loss Ratio and, from an investment perspective, it seems compelling to me.”
Related: Wait for maximum pain or buy the dip? Analysts debate whether Bitcoin’s price has bottomed
It is not possible to recover in a V-shaped fashion.
Market analyst and pseudonymous Twitter User ‘Rekt Capital” provided insight into the requirements for Bitcoin to regain its bullish momentum. He posted the following chart, noting that Bitcoin “needs $28,600 support for the price of challenge $32,000,” while a weekly close below the green would be bearish.
BTC/USD 1-week chart. Source: Twitter
Many traders hope for rapid recovery after this downturn. However, Rekt Capital cautioned that a sharp V-Shaped recovery, which would mark a historical bottom, is less likely.
According to the analyst,
Many expect one, as the March 2020 BTC bear markets bottom was extremely volatile. However, macro price history suggests that extended ranges are more probable.
The total cryptocurrency market is now worth $1.287 trillion. Bitcoin’s dominance rate at 44.4%.
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