Bitcoin has been struggling along with risk assets in recent months. It’s largely traded in a range of $35,000 to $45,000 this year as the Federal Reserve started hiking interest rates amid stubbornly high inflation. Analysis from data provider Glassnode suggests that interest in Bitcoin has remained muted, with little growth in the coin’s user base and minimal flows of new demand.
Read more: Bitcoin Risk-Reward Calculation is Being Upended by Rising Rates
Many Bitcoin bulls remain unbowed, with predictions of $100,000 and even higher still being mentioned. But price targets like $500,000 and $1 million circulating mean “it’s hard for us to figure sentiment remains anything but constructive. And with a chart that looks like this that’s bad news,” Roque said.
Bitcoin has climbed back to $61,000, as a small rally on Thursday morning followed a crash
Why did Bitcoin crash?
While Wednesday’s crash was not major compared to many that have come before, it still wiped hundreds of billions of dollars from the cryptocurrency market.
Blockchain data suggests it could have been due to people selling their assets, which often happens when Bitcoin and other cryptocurrencies reach record highs.
Ki Young Ju, CEO of data analytics firm CryptoQuant, told CoinDesk: “Estimated leverage ratio is about to hit a year-high. It seems obvious that the market is over-leveraged now.
“We’ll see some volatility with huge liquidations shortly.”
Analysts have suggested the dog-based coins peaking sometimes signals a downturn for the wider crypto market.
Delphi Digital analysts said in a note published on Monday: “Dog coins are mooning again, which has historically been a pretty good indication of an overheated market.
“The first time dog coins went wild was April-May this year, and quickly cratered as crypto markets cooled off. In early September, dog coins were all the rage again and the broader crypto market saw a fairly deep de-leveraging.”
Why is it bouncing back?
Thursday’s price increase could be down to investors buying the dip.
Freddie Evans, a sales trader at the UK based digital asset broker GlobalBloc, told The Independent on Wednesday: “The markets have taken a tumble this morning after Bitcoin broke the $60,000 support. Investors have been on edge expecting a correction as the markets have looked over leveraged.
“The drop has been predicted by many analysts and provides an opportunity to those looking to buy the dip, meaning it could be that this re-tracement is short lived and we head back above $60,000 before too long. Almost all coins are down over the last 24 hours, but we’ve seen more buyers than sellers in this morning’s session so far.”
On Wednesday evening El Salvador’s president, Nayib Bukele, announced the country has purchased 42 more Bitcoin.