Bitcoin is on another recovery path after suffering one of the worst declines of 2022. The digital asset had hit a low of $15,500 before bouncing back up, all of this happening in response to the decline of FTX, the second-largest crypto exchange by trading volume. The price of bitcoin had altered and recovered above $17,000, dragging the market back into the green, but this could only be a short-lived recovery.
A Bull Trap In The Making
With the decline that was seen in bitcoin and the general crypto market on Wednesday, it was expected that there would be some kind of recovery. This was further propelled forward by the positive CPI data release on Thursday, triggering a good bounce in the price of the digital asset.
However, it is not exactly a completely positive return given how much of its value was recovered and the time frame in between. More often than not, recoveries like these are a bull trap intended to pull more liquidity into the market.
Even with the recovery in price, the sell-offs have not subsided, which puts investors coming into the market at these prices at a disadvantage. A retracement from this level will likely lead to lower lows and a new cycle low.
BTC price remains volatile | Source: BTCUSD on TradingView.com
There is also no significant support for bitcoin above $17,000. Everything from the current price down to $16,500 hangs by a thread. This means that bitcoin will not be able to withstand another downtrend and will see it establishing support just above $16,000.
Bitcoin Still Not Bottomed
For many, it is easy to believe that the bottom is in for the digital asset simply because it has fallen below its previous cycle low, but historical trends show there is still more decline to come. It was the case with bitcoin back in 2018 when the price had finally hit $10,000 and it seemed there was nowhere left to go. In the end, BTC would bottom out just above $3,000.
With bitcoin sitting well below its 50-day moving average, the sell-off trend remains strong. Too much supply is being dumped in the market with not enough demand to soak it up. Add in the fact that the FTX case is still unraveling and will do so for the next few months, and more downside is expected for bitcoin.
A likely bottom point for bitcoin during this cycle would be the $13,000-$14,000 level with some wiggle room. Altcoins will also suffer more losses according to current market movements and the decreased faith in the crypto market.
Featured image from Barron's, chart from TradingView.com
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