Cryptocurrency markets might be close to hitting the low point of their current slump, but analysts at Compass Point suggest that a larger risk-off event is necessary for Bitcoin to climb again.
In a report released Monday, analysts Ed Engel and Michael Donovan indicated that while immediate risks seem to tilt downward, the crypto bear market appears to be approaching its conclusion. They noted that any further price dips likely hinge on a bear market in the U.S. stock sector.
They anticipate Bitcoin reaching a low between $60,000 and $68,000, a range where long-term holders have previously shown strong purchasing activity. “We believe there’s solid support at this level, with our estimated bottom for Bitcoin around $65,000,” they mentioned. They pointed out that about 7% of Bitcoin owned by long-term holders were bought within that $60,000 to $68,000 bracket.
Over the weekend, Bitcoin dropped below $81,000 to around $74,532, which analysts claim represents the average cost base for both Bitcoin ETF investors and the overall market. “Since January 15, Bitcoin ETFs have seen net outflows of $3 billion. With more than half of the ETF assets currently losing value, we expect these outflows to continue, alongside potential resistance in the $81,000 to $83,000 range,” they added.
“Air Pocket”
Engel and Donovan highlighted the existence of an “air pocket” in the $70,000 to $80,000 price area, noting that there’s minimal structural support above $70,000.
“Fewer than 1% of long-term holdings have been made in this range,” they said, cautioning that this could spur additional selling pressure.
Should Bitcoin slip below the $60,000 to $68,000 support level, it could drop to around $55,000, although that would only occur under more extreme conditions. “Historical bear markets typically bottom below the average cost basis of all buyers,” they observed. Currently, that figure stands near $55,000, but during the 2022 bear market, a mix of an equity bear market and notable crypto collapses were required to penetrate this average cost level.
