Bitcoin is on another recovery path after suffering one of the worst drops of 2022. The digital asset hit a low of $15,500 prior to the back up, all in response to the decline of FTX, the second largest crypto exchange by trading. amount. Bitcoin price turned upside down and recovered above $17,000, bringing the market back into the green, but this may only be a short-term recovery.
bull trap in the making
The fall that was seen in bitcoin and the crypto market in general on Wednesday gave hope to some sort of recovery. This was further strengthened by the release of positive CPI data on Thursday, leading to a decent jump in the price of the digital asset.
However, this is not an entirely positive return, considering how much of its value was recovered and the time frame between. More often than not, such a recovery is a bull trap intended to draw more liquidity into the market.
Even after the correction in the prices, the selling has not subsided, causing a loss to the investors coming to the market at these prices. A retracement from this level could lead to lower lows and a new cycle low.
BTC price remains volatile | Source: BTCUSD on TradingView.com
There is also no significant support for bitcoin above $17,000. Everything is hanging by a thread below the current price till $16,500. This means that Bitcoin will not be able to face another downtrend and will see it establishing support above $16,000.
bitcoin is still not down
For many, it is easy to believe that the digital asset bottom is simply because it has dropped from its previous cycle lows, but historical trends suggest that further downside is yet to come. This was the case with bitcoin in 2018, when the price finally reached $10,000 and it seemed there was nowhere to go. In the end, BTC will only hold above $3,000.
As Bitcoin is well below its 50-day SMA, the selling trend remains strong. Too much supply is being dumped in the market and there is not enough demand to absorb it. Add to this the fact that the FTX case is still settled and will do so for the next few months, with further downside expected for Bitcoin.
A possible low for bitcoin during this cycle could be the $13,000- $14,000 level, with some volatility. Altcoins will also suffer more as per the current market movements and lack of confidence in the crypto market.
Featured image from Barron's, chart from TradingView.com
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