Bitcoin Bounces Back: Is This a Temporary Recovery or Start of a Bear Market?

The post Bitcoin Bounces Back: Is This a Temporary Recovery or Start of a Bear Market? appeared first on Coinpedia Fintech News

Bitcoin’s Price recovered over 13% to $49,557 after a big slump. The Crypto Fear and Greed Index reached “Extreme Fear” for the first time in two years, and U.S. spot Bitcoin ETFs lost $168.4 million. The market sentiment indicator dropped to 17 out of 100 on August 5, its lowest since July 12. The Japan stock crash has negatively impacted Bitcoin, Ethereum, and the altcoin market. 

Crypto analyst VirtualBacon delves into whether this marks the start of prolonged bearish trends or a temporary correction.

The Global Financial Market Halted

VirtualBacon explains that the financial markets are facing a selloff due to the unwinding of the Japanese Yen carry trade against the US dollar and foreign stocks. The Bank of Japan (BoJ) raised interest rates above 0% for the first time since 2008, causing many to pull out of leveraged positions. This is happening alongside potential US Federal Reserve interest rate cuts and recession fears.

The worldwide market crashed after the BoJ raised rates. Over the past year, the sinking of the Japanese Yen versus the US dollar caused inflation, forcing Japan to raise rates, raise borrowing costs, and unwind the carry trade. Korea, Taiwan, and Japan markets fell, with the Nikkei falling nearly 12%. Both the S&P 500 and NASDAQ suffered but recovered.

Potential US Federal Reserve Actions

Next, the expert underlined the heated debate over whether the US Federal Reserve will cut emergency rates. Past examples are COVID-19 in March 2020 and Lehman Brothers in 2008. Immediate rate cuts may boost the market but not prevent a recession. The Fed might prefer to wait until the next FOMC meeting in September to base their decision on more comprehensive data.

Managing the Market Downturn

Experts suggest adopting a probabilistic approach during uncertain times. Avoiding leverage and employing dollar-cost averaging (DCA) in positions can mitigate risks and allow for gradual investment without the pressure of timing the market perfectly.

For Bitcoin, prices could range between $50k and $55k, with significant support between $41k and $43k. Ethereum’s current price of around $2,000 presents a buying opportunity, with expectations of higher values by year-end. Solana is another strong large-cap asset, showing significant consolidation between $80 to $115.

Advice for Investors

The expectation is that by September 17-18, asset prices should begin to recover and improve through the year-end. Monitoring key indices like the S&P, NASDAQ, and the VIX (volatility index) can provide insights into market trends. Despite the current downturn, there’s no point in selling now. Controlling leverage and strategically positioning investments can help navigate the next 45 days, with better times anticipated.

The future of crypto assets is uncertain. Should you buy the dip or sell the top? Let’s debate.