Bitcoin’s decline is oversold, but it’s too early to talk about a new rally
|Bitcoin has rebounded 5% in the past 24 hours, trading at $20,800. Ethereum has recovered 6.4% to $1130 in the same time frame. Leading altcoins in the top 10 are adding from a modest 3.5% (XRP) to an impressive 15% (Solana).
Total cryptocurrency market capitalisation, according to CoinMarketCap, rose 5% to $914bn. Tuesday, the cryptocurrency fear and greed index was unchanged at 9 points (“extreme fear”).
Bitcoin managed to hold above the $20,000 round level on Monday amid weak trading activity due to the US holidays and attracting enough speculative demand after dipping below the meaningful round level. This recovery removes some of the extreme oversold nature of the cryptocurrency. Still, it will be too early to talk about a long-term reversal: all negative fundamentals remain.
In our view, until sharp monetary policy tightening becomes the norm, financial market pressures can quickly negate bounces in cryptocurrencies. Even if we have seen a bottom, it could still be months before the next sustained rally.
Bitcoin’s return above $20,000 does not mean it has hit “the bottom”, warned renowned cryptocurrency critic and gold supporter Peter Schiff.
Kraken exchange marketing director Dan Held said bitcoin had chosen the most pessimistic scenario possible amid rising inflation and an impending recession. According to him, “those who survive will get HODLer status”.
El Salvador President Nayib Bukele urged the cryptocurrency community not to panic as the market falls. According to him, the decline is relatively standard, and market participants must be patient.
JPMorgan Bank said that the rising share of stable coins in the total market capitalisation of the crypto market indicates its growth potential.
Changpeng Zhao, chief executive of cryptocurrency exchange Binance, denied media reports that the platform bought more than 100,000 BTC on a falling market.
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