Bitcoin’s decline is oversold, but it’s too early to talk about a new rally
Bitcoin has rebounded 5% in the past 24 hours, trading at $20,800. Ethereum has recovered 6.4% to $1130 in the same time frame. Leading altcoins in the top 10 are adding from a modest 3.5% (XRP) to an impressive 15% (Solana).
Total cryptocurrency market capitalisation, according to CoinMarketCap, rose 5% to $914bn. Tuesday, the cryptocurrency fear and greed index was unchanged at 9 points (“extreme fear”).
Bitcoin managed to hold above the $20,000 round level on Monday amid weak trading activity due to the US holidays and attracting enough speculative demand after dipping below the meaningful round level. This recovery removes some of the extreme oversold nature of the cryptocurrency. Still, it will be too early to talk about a long-term reversal: all negative fundamentals remain.
In our view, until sharp monetary policy tightening becomes the norm, financial market pressures can quickly negate bounces in cryptocurrencies.
