The current market scenario for cryptocurrencies is only intended for traders who have an extremely high risk tolerance. But for the faint of heart, analysts advise patience and caution.
The outlook is bright for Bitcoin (BTC) and Ether (ETH), the leading cryptocurrencies by market capitalization that are more or less acting as locomotives for the rest of the crypto market. According to data from Skew, realized ETH / USD volatility on a 30-day timeframe hit near its 2017 highs on Wednesday.
The realized 30-day volatility of Bitcoin and Ether will reach the high of 2021. Source: Bybt.com, Skew
Meanwhile, Bybt.com is showing Bitcoin’s 30-day volatility at its yearly high, suggesting that the benchmark asset will continue to face sharp price fluctuations in the upcoming sessions. Simply put, the top two crypto assets show a probability of moving in either direction with higher volatility. All in all, this could mean both aggressive gains and losses for day traders.
Buy in a falling market
The volatility alert is sounding at the time both Bitcoin and Ether have seen incredible recovery rallies after their recent price drops. Looking back, the BTC / USD exchange rate plummeted more than 50% after surpassing nearly $ 65,000 in April – a correction propelled in part by Elon Musk’s anti-Bitcoin tweets and China’s rerun of crypto ban last week has been.
Ether, whose positive correlation efficiency with Bitcoin is currently close to 0.88, has left the declining correction in the digital benchmark asset behind. The second largest cryptocurrency saw its market valuation drop by a maximum of 60% – compared to its record high of $ 4,380 in mid-April.
But the bulls saw opportunities in the aforementioned price declines in that they helped Bitcoin and Ether prices rebound from their local lows by up to 36.12% and 68.52%, respectively. Some analysts assumed that the upward retracement would widen further on the back of supportive macroeconomic catalysts, mainly inflation fears.
Tech cop Cathie Wood, who heads Ark Investment Management, reiterated her Bitcoin price target of $ 500,000 after last week’s crash, calling the slump “a really great time to buy.”
Ark’s Cathie Wood holds on to her $ 500,000 target for Bitcoin #TheBusinessweek https://t.co/9eBp5M39Zi pic.twitter.com/VeSRF5fplm
– Businessweek (@BW) May 19, 2021
Nonetheless, many traders warned against buying even during a bearish correction phase, especially after a year-long price rally that increases the risk of profit-taking by long-term investors. Analysts at BiotechValley Insights Consulting Group found that Bitcoin fell sharply even after the US consumer price index rose to 4.2%, saying that the crypto market is now going through a “fearful phase”.
“I believe Bitcoin still has a long way to go from here,” one of the BiotechValley analysts wrote in a note. “I think it will slowly drag down the slope of hope with a periodic leap of the dead cat.”
The group called for a price target of $ 15,000 to $ 16,000 for Bitcoin.
Lower risk appetite? Just wait
Koroush AK, an independent market analyst, took a medium-sized approach. He advised traders to wait for a significant jump above short-term resistance levels before determining their market tilt and tweeted:
“After a market crash of more than 60%, it will take more than a little recovery before I can shift the trend back to bullish bull markets. Be careful until we loot $ 45,000 BTC and $ 3,400 ETH. [I] will be patient here. You don’t have to hit exact lows or sell exact highs to make money. “
The recent rebound coincided with an increase in the number of outstanding Bitcoin futures contracts from $ 11 billion to $ 11.88 billion, showing a steady increase in leveraged positions in the derivatives market. Meanwhile, more than $ 12 billion worth of long positions have been liquidated since the May 19 price crash.