The current cryptocurrency market scenario is only for traders that have an extremely high appetite for risks. But for the weak-hearted ones, analysts advise patience and caution ahead.
The outlook stands tall for Bitcoin (BTC) and Ether (ETH), the top cryptocurrencies by market capitalization that more or less behave as locomotives for the rest of the crypto market. As of Wednesday, the ETH/USD Realized Volatility on a 30-day timeframe has reached near its 2017 peak levels, according to data provided by Skew.
Meanwhile, ByBt.com shows Bitcoin’s 30-day volatility at its yearly high, suggesting that the benchmark asset remains at risk of wild price fluctuations in the sessions ahead. Simply put, the top two crypto-assets show a likelihood of moving in either direction with a higher degree of volatility. All and all that could mean both aggressive gains and losses for daytraders.
Buying in a falling market
The volatility alarm rings at the time when both Bitcoin and Ether have posted incredible recovery rallies following their recent price declines. In retrospect, the BTC/USD exchange rate plunged more than 50% after topping near $65,000 in April — a correction partially driven by Elon Musk’s anti-Bitcoin tweets and China’s crypto ban reiteration last week.
Ethereum, whose positive correlation efficiency with Bitcoin currently sits near 0.88, tailed the benchmark digital asset’s bearish correction. The second-largest cryptocurrency experienced a maximum of 60% decline in its market valuation — compared to its record high of $4,380 from mid-April.
But bulls saw opportunities in the said price dips, insomuch that they helped Bitcoin and Ether prices recover by up to 36.12% and 68.52% from their local price bottoms, respectively. Some analysts anticipated that the upside retracement would extend further based on supportive macroeconomic catalysts, mainly inflation fears.
Tech bull Cathie Wood, who heads Ark Investment Management, reiterated her $500,000 bitcoin price target after last week’s crash, calling the dip “a really great time to buy.”
— Businessweek (@BW) May 19, 2021
Nevertheless, many also cautioned traders against buying during a bearish correction phase, especially after a yearlong price rally that increases the risks of profit-taking by long-term investors. Analysts at BiotechValley Insights Consulting Group noted that Bitcoin dropped hard even after the U.S. Consumer Price Index rose to 4.2%, stating that the crypto market is now going through an “anxiety stage.”
“I believe Bitcoin has a long way to fall from here,” one of the BiotechValley analysts wrote in a note. “I think it will slowly grind down the slope of hope with a periodic dead cat bounce.”
“I think it will slowly grind down the slope of hope with a periodic dead cat bounce.”
The group called for a $15,000-$16,000 price target for Bitcoin.
Lower risk-appetite? Just wait
Koroush AK, an independent market analyst, took a rather middle approach. He advised traders to wait for a clear bounce above short-term resistance levels before determining their market bias. Excerpts from his tweet:
“After a 60%+ market crash, it’ll take more than a small bounce for me to shift bias back to bull market bullish. Cautious until we capture $45,000 BTC and $3,400 ETH. [I] will be patient here. Don’t need to catch exact bottoms or sell exact tops to make money.”
The recent rebound has coincided with an increase in the number of outstanding Bitcoin Futures contracts from $11 billion to $11.88 billion, showcasing a steady climb in leveraged positions in the derivatives market. Meanwhile, more than $12 billion worth of long positions has been liquidated since the May 19 price crash.