Altcoins saw a relief bounce on May 13 as the initial panic sparked by Bitcoin’s sell-off Terra’s UST collapse and multiple stablecoins losing their dollar peg begins to decrease and risk loving traders look to scoop up assets trading at yearly lows.
Daily cryptocurrency market performance. Source: Coin360
Despite the significant correction that occurred over the past week, Bitcoin (BTC) bulls have managed to claw their way back to the $30,000 zone, a level which has been defended multiple times during the 2021 bull market.
Here’s a look at what several analysts have to say about the outlook for Bitcoin moving forward as the price attempts to recover in the face of multiple headwinds.
Is a short squeeze pending?
Insight into the minds of derivatives traders was provided by cryptocurrency analytics platform Coinalyze, which assessed Bitcoin long to short positions for BTC/USD perpetual contracts on ByBit.
BTC/USD perp 1-day chart vs. long/short BTC/USD accounts ratio. Source: Twitter
As shown in the lower half of the chart above, the interest in shorts, which is represented in red, has surged during the recent market downturn indicating that derivatives traders expected more downside in the short term.
“The sentiment was very negative over the last few days, as seen in ByBit long/short ratio and funding rate. A short squeeze/bounce is expected” Coinalyze founder Gabriel Dodan told Cointelegraph in private comments.
A short-term breakout to $35K is expected
Bitcoin’s dip to $26,716 on May 12 was notable in that it broke below the May 2021 low at $28,600, “which was seen as the last man standing for BTC” according to David Lifchitz, managing partner and chief investment officer at ExoAlpha.
In Lifchitz’s view, the bounce seen on May 13 was to be expected as “a lot of bad news had been flushed out” while the “panic move from the UST fiasco has already occurred.”
Bitcoin sitting at the May 2021 lows “seems like a good entry point here with a tight stop should the purge continue” according to Lifchitz, but traders shouldn’t expect a return to $60,000 to happen overnight and instead should set a more modest short term target of $35,000.
“Long at $28.5K / Stop at $26.5K / Profit Target at $34.5K = $6K upside / $2K downside = 3/1 win/loss ratio and from an investment point of view, it looks compelling to me.”
A V-shaped recovery is unlikely
Insight into what it would take for Bitcoin to regain its bullish momentum was provided by market analyst and pseudonymous Twitter user ‘Rekt Capital’, who posted the following chart noting that BTC “needs to keep $28,600 as support for the price to challenge $32,000,” while a “weekly close below the green would be bearish.”
BTC/USD 1-week chart. Source: Twitter
While many optimistic traders are hoping for a rapid recovery from this latest downturn, Rekt Capital warned that “by standards of history, a sharp V-Shaped recovery to mark out 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 overall cryptocurrency market cap now stands at $1.287 trillion and Bitcoin’s dominance rate is 44.4%.
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