Bitcoin price rockets 14% but experts say cryptos aren’t out of the woods yet

A Bitcoin symbol atop a spring, indicating the uncertain direction of cryptocurrency as a commodity

A Bitcoin symbol atop a spring, indicating the uncertain direction of cryptocurrency as a commodityThe Bitcoin (CRYPTO: BTC) price is in the spotlight as investors try to determine if the world’s biggest cryptocurrency by market cap could have reached the bottom.

It’s been a tough year for most all cryptos, with the Bitcoin price setting the tone, down 58% year-to-date and down 71% since its 10 November record high.

However, the past two days have seen an uptick.

Bitcoin price rebounds from fall below critical level

Things took a turn for the better over the weekend, with the token gaining 16% on Sunday. Though it should be noted that the outsized gain came after the price fell to US$17,709 early on Sunday.

That’s the lowest level since December 2020. And for the first time in its trading history, that saw the Bitcoin price fall below the peak of US$19,511 it achieved in the previous cycle. Analysts have been predicting that a fall below previous cycle highs could see the token slide much further.

So far, that hasn’t eventuated. But the Bitcoin price remains within a whisker of that figure, currently trading for US$19,993.

Commenting on why the world’s original crypto saw a rebound over the weekend, Paul Veradittakit, a partner at hedge fund Pantera Capital, was quoted by Bloomberg as saying: “I think we started to hit levels near the bottom where institutional investors see a buying opportunity.”

Institutional buyers may have been hitting the buy button. But many analysts remain cautious on the short to medium-term outlook for cryptos.

Dip buyers beware

Katie Stockton, managing partner at Fairlead Strategies, said “momentum is strongly negative” in the crypto space, and she cautioned investors against buying the dip.

According to Noelle Acheson, head of market insights at Genesis (courtesy of Bloomberg):

What we’re seeing is more liquidations driving prices and sentiment lower, which triggers more liquidations and negative sentiment – some flushing-out needed still, but this will at some stage exhaust itself.

That stage, however, may not be here yet, as the Bitcoin price could need some more flushing out.

Alkesh Shah is the head of crypto strategy at Bank of America. According to Shah:

Investors are continuing to position defensively following last year’s liquidity-driven digital asset bull market. Although painful, removing the sector’s froth is likely healthy as investors shift focus to projects with clear road maps to cash flow and profitability versus purely revenue growth.

Atop the new environment of rising interest rates, the Bitcoin price, and cryptos more broadly, have been hit by a number of industry setbacks.

Last month, there was the sector-shaking collapse of Terra’s UST stable coin and its supporting token, Luna. More recently, crypto lender Celsius, which offered outsized yields, is stirring investor angst by halting withdrawals.

And other players in the sector are now looking shaky, which could further erode confidence in digital assets and drag on the Bitcoin price.

Teong Hng, CEO of Satori Research, said, “After Celsius, the focus last few days has been Three Arrow Capital and Babel Finance. Su Zhu, the founder of 3AC seems to be missing in action after purportedly suffering huge losses due to massive drop in crypto this round.”

The post Bitcoin price rockets 14% but experts say cryptos aren’t out of the woods yet appeared first on The Motley Fool Australia.

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Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin. The Motley Fool Australia has positions in and has recommended Bitcoin. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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