Bitcoin is experiencing price relief in lower timeframes after the crypto market crashed to its 2020 levels. This pushed the cryptocurrency to a yearly low of $17,500, a 75% drop from its all-time high, and Ethereum to $870 an 82% drop from its all-time high.
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This number is standard for a crypto bear market, Bitcoin is known for experiencing similar crashes in the past and could possibly suggest it has completed a new market cycle. At the time of writing, Bitcoin trades at $21,300 with a 4% profit in the past 24 hours.
In a market update, trading desk QCP Capital provided potential scenarios for Bitcoin as it recovers from a crash. The firm expects a potential continuation for BTC’s price as it makes it climbs its way to previous levels.
Despite the downside trend, QCP Capital claims BTC’s price saw a positive reaction from the lows as it quickly managed to get above $20,000. In that sense, they believe the selling pressure that took BTC to $17,000 was “less leveraged liquidations and more miners reducing inventory”.
Liquidation from leveraged positions often leads to price consolidation as the assets take time to recover. In other words, BTC’s price is likely to continue up and less likely to stay in a specific price area, as it did in the past month when it was stuck at $28,600 and $31,500.
In addition, QCP Capital believes the options market is hinting at less downside fear. Institutions are “stating to put on bullish structures in size”, the trading firm claimed while adding the following:
Macro factors are also lending short-term support. Oil prices have dropped from above 123 to below 110. Other commodities have followed suit as well. This is significant as it reduces inflationary pressure, allowing the Fed to ease up on their tightening stance. A big positive for markets all round.
As NewsBTC reported, a decline in the price of commodities could suggest the U.S. Federal Reserve (FED) and its monetary policy are making an impact across global markets. Thus, reducing inflation and giving Bitcoin and other risk-on assets some breathing room, at least, for the short term.
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After a 75% crash, Bitcoin is usually at attractive levels to increase long-term holding. However, investors should operate with caution and apply a dollar-cost average (DCA) strategy. In that sense, QCP Capital added:
we remain on guard. Quarter-end fund redemptions are likely to put some pressure on prices along with the possibility of more crypto insolvencies being unearthed.
