beware of a dead cat bounce

beware of a dead cat bounce

After the worst crash of the year, Bitcoin price has seen a dead cat rally. BTC is trading at $30,500, up from this week’s low of $25,300. It is well below its all-time high of nearly $70,000. So, will this recovery last?

Bitcoin recovery

BTC prices have risen over the past few hours as investors rushed to buy the coin’s dip. Many market participants believe that the coin has become very cheap considering the worst week of the year.

A closer look at the market shows that BTC’s recovery mirrors that of the stock market. Tech stocks have been somewhat positive over the past two days following some notable developments. The Nasdaq 100 has risen from a weekly low of $11,700 to $12,213. Recently, we have seen a strong correlation between tech stocks and digital currencies.

Also, Bitcoin prices have remained stable as Tether has held up well. The stablecoin temporarily lost its peg on Thursday, causing many investors to worry about its future. This comes as the Terra USD stablecoin continues to struggle.


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Another reason Bitcoin is doing so well is that many big investors seem to have stakes in Bitcoin. For example, in an interview with CNBC on Thursday, legendary investor Bill Miller said he still holds his assets. Likewise, other investors such as Tesla and MicroStrategy have yet to sell their stakes.

Still, investors should take this rally with a grain of salt. Historically, assets tend to bounce back briefly after massive sell-offs. This happens when investors buy the dip. In most cases, the relief bounce, commonly known as the dead cat bounce, tends to moderate.

Bitcoin Price Prediction

The four-hour chart shows that BTC price formed a hammer pattern on Thursday. In price action analysis, this is one of the most reliable bullish reversal candlestick patterns. The coin is now stuck at the 25-day moving average while the Relative Strength Index (RSI) has moved up.

Hence, it is possible that Bitcoin prices will continue to rise over the weekend, especially if the Nasdaq 100 closes in the green. However, in the coming days, there is a possibility that the pair will resume its downtrend in the coming week.

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