Altcoins experienced a relief bounce on May 13, as the initial panic caused by Bitcoin selling, the collapse of Terra’s UST and the loss of the dollar peg of multiple stablecoins begins to subside and risk-loving traders look to pick up assets trading at yearly lows.
Despite the significant correction that occurred last week, Bitcoin (BTC) bulls have managed to return to the $30,000 zone, a level that has been defended multiple times during the 2021 bull market.
Below is what various analysts have to say about the outlook for Bitcoin going forward as the price attempts to recover in the face of multiple headwinds.
Is a short position choke pending?
The cryptocurrency analysis platform Coinalizewhich evaluated Bitcoin long and short positions for BTC/USD perpetual contracts on ByBit, provided insights into the minds of derivatives traders.
As shown in the bottom half of the graph above, interest in short positions, depicted in red, has spiked during the recent market downturn, indicating that derivatives traders were expecting more short-term declines.
“Sentiment has been very negative in recent days, as seen in ByBit’s long/short ratio and funding rate. A short/bounce squeeze is expected,” Coinalyze founder Gabriel Dodan told Cointelegraph in private comments.
A short-term breakout to $35,000 is expected
Bitcoin’s crash to $26,716 on May 12 was notable because it broke below the May 2021 low of $28,600, “which was seen as the last man standing for BTC,” according to David Lifchitz, managing partner and chief investment officer of ExoAlpha.
In Lifchitz’s opinion, the rebound seen on May 13 was to be expected since “a lot of bad news had been removed” while the “UST fiasco panic movement is over”.
According to Lifchitz, Bitcoin sitting at May 2021 lows “looks like a good entry point here with a tight stop in case the purge continues”, but traders should not expect a return to $60,000 to happen overnight, and should instead set a more modest short-term target of $35,000.
“Long $28,500/ Stop $26,500/ Profit Target $34,500 = $6,000 up / $2,000 down = 3/1 P/L ratio and from an investment standpoint, I would looks convincing.”
A V-shaped recovery is unlikely to occur
The insight into what it would take for Bitcoin to regain its bullish momentum was provided by market analyst and pseudonymous Twitter userr ‘Rekt Capital’, which public the chart below noting that BTC “needs to hold $28,600 as support for price to challenge $32,000”, while a “weekly close below the green zone would be bearish.”
While many bullish traders expect a quick recovery from this latest decline, Rekt Capital warned that “By the standards of history, a strong V-shaped recovery to mark a generational bottom is less likely.”
the analyst said:
“Many expect one as the previous March 2020 BTC bear market bottom was very volatile. But macro price history suggests extended ranges are more likely.”
The total cryptocurrency market capitalization currently stands at $1.287 trillion and the dominance rate of Bitcoin is 44.4%.
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