Bitcoin Recovers to $21,000, but Traders Wary of Further Rally
Bitcoin (BTC) showed early signs of recovery as it extended its second day of gains on Tuesday, holding over the $21,000 barrier in European hours. Even though established banking firms Morgan Stanley (MS) and Goldman Sachs (GS) said in client notes that recession risks were “not fully priced in,” the spike still occurred.
Morgan Stanley said in its note that “The bear market will not be over until recession arrives or the risk of one is extinguished,.” In a similar vein, Goldman analysts said stock traders were pricing in a mild recession, “leaving them exposed to a further deterioration in expectations,” as per Bloomberg.
Bitcoin managed to maintain above the $20,000 round barrier on Monday, according to certain analysts like FxPro’s Alex Kuptsikevich, despite minimal trading activity due to the US vacation. Kuptsikevich went on to say that Bitcoin had “attracted enough speculative demand” to fuel movement in the previous two days.
However, Kuptsikevich remained skeptical that the surge would continue. He argued that it is far too early to discuss long-term gains and a reversal of BTC’s recent turmoil. Kuptsikevich also noted that the market pressures would likely be able to quickly negate any rebounds for different cryptocurrencies.
Bitcoin prices plummeted below $20,000 last weekend, marking the first time in the asset’s history that prices have fallen below previous highs. Over the weekend, the dynamics resulted in a record $7.3 billion in losses for bitcoin holders, as reported.
Bitcoin’s gains on Tuesday prompted a rally for other major cryptocurrencies, with the price of ether (ETH) having risen 6.4 percent to $1,130 in the last 24 hours, while the price of Solana’s SOL has risen as much as 15 percent due to a surge in transactions. According to CoinMarketCap, layer one tokens like Avalanche’s AVAX and Polkadot’s DOT increased by at least 8%, while the whole cryptocurrency market capitalization increased by 5% to $914 billion.
Several reputable crypto analysts are skeptical about the reversal, arguing that it is a mirage and the overall trend is still bearish for the time being.
Chris Terry, vice president at lending platform SmartFi, said, “Everybody kind of feels that Bitcoin needs to wash out and take out all the short positions.” Terry believes that the value of BTC could decline to $12,000 to $13,000 before there is a chance of a significant reversal.
Lily Zhang, chief financial officer at crypto exchange Huobi Global, said the group remained “long-term bullish on crypto” but showed concerns in the short run. Zhang added that “Our market indicators show that there is an unprecedented level of fear, uncertainty, and doubt in the market.” They concluded their statement by noting that “On-chain liquidations may trigger a cascade of drawdowns as the market sees a large wave of capitulations.”
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