Bitcoin show signs of a dead cat bounce while investors hope for prompt recovery

Bitcoin is hovering around $17,000 after a heart-breaking sell-off to $16,200 on Thursday. However, the industry experts warn that the downside correction has just started. The market should brace for an extended decline at least towards $13,000 before the bearish momentum runs out of steam and gives way to another massive bullish wave.

As FXStreet previously reported, the overall consensus among some of the most prominent traders in the industry implies that BTC may extend the recovery into the end of the week and even explore the area above $18,300. However, the upside momentum will be short-lived as it is just a dead cat bounce.

Bitcoin price bounces during retracements

The concept of a dead cat bounce is well-known in the traditional markets. It is characterized by a short-lived price recovery after a prolonged decline or a bear market, inevitably followed by another leg down  Just as a dead cat can bounce if it falls fast and far enough, the prices can also stage small rallies within the dominating downside trend. 

Bitcoin has its history of dead cat bounces during the crypto winter and the post-COVID19 sell-off. It is natural that the downtrends are interrupted by brief rallies. The tricky thing is that the bounce may look like a reversal at first glance and usually they are identified postfactum. 

Currently, traders continue moving BTC tokens to cryptocurrency exchanges' accounts, which is a clear signal that the selling pressure remains high.

Ki-Young Ju, the head of on-chain data provider CryptoQuant, notes that when exchange inflows stay elevated, Bitcoin price remains vulnerable to a potential sell-off.

Corrections are not scary, but necessary

While a sharp sell-off may look discouraging, the long-term Bitcoin price outlook remains bullish. 

The fundamental environment implies that Bitcoin will continue benefitting from the ultra-accommodative monetary policies exercised by the vast majority of global central banks. Considering the potential inflationary effects of the money-printing strategies, international investors will likely continue moving their wealth to digital assets, such as Bitcoin. This trend already started earlier this year, and it will only gain more traction.  

Now that the US presidential election is over, the market sentiment has improved and inspired a rally of risky assets. Meanwhile, Joe Biden's victory is regarded as a positive sign for the industry as he is focused on innovations and intends to bring more regulatory clarity to the digital assets industry.

To sum it up, Bitcoin price may experience another steep decline with a potential target of $13,000. But in the long-run, the pioneer cryptocurrency is poised for further gains.