Why Bitcoin’s price turnaround to $40K isn’t a dead cat bounce

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Bitcoin price movement effectively demolishes and rebuilds the industry while retaining its $10,000 gains.

Bitcoin (BTC) saw a one-of-a-kind drop on May 19, crashing to $30,000 in a frantic three-hour shakeout that upended the economy.

However, once the dust settles, it’s no longer about the dip, but about the revival — what makes existing BTC market behaviour unique?

A bounce like no other

It took around one hour for BTC/USD to go from $39,000 to $30,000 on Wednesday. This is a formidable drop, but nothing unheard of when it comes to historical price action.

BTC/USD price corrections from highs chart. Source: Twitter

In dollar terms rather than percentage, however, that hour was unlike anything seen before. Even during the Covid-19 crash in March 2020, Bitcoin’s 60% correction was smaller when measured in USD.

As if it wasn’t unusual enough, what came next was even more so.

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Since bouncing at precisely $30,000, Bitcoin rocketed to $37,000 nearly immediately, before breaking $40,000 soon thereafter. This was the largest turnaround in history, easily outperforming March 2020 in both percentage and raw USD terms.

Bitcoin stood firm in what cynical outlets dubbed a “dead cat bounce,” and was still circling around $39,000 at the time of publication, more than 12 hours after the bounce.

 

BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView

Leveraged players learn the hard way… again

Bitcoin’s market structure has shifted in the last 24 hours, and it now likely consists of a new kind of trader.

This is attributed to the veracity of both the drop and the turnaround — regular liquidations by traders totalled more than $8 billion in total.

 

This was however not an unusual phenomenon, as stock fluctuations routinely robbed the fortunes of a vast number of leveraged traders in particular. However, due to the magnitude of the USD drop, anybody who had a long bet was likely to be frozen out of the market with nothing.

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Those hoping for a further retracement to the old all-time highs of $20,000 were also taken care of on the way back up. Order book data at the time shows that support thresholds were mostly missing below $30,000, implying that such a situation was a possible possibility.

 

BTC/USD buy and sell positions (Binance) as of May 20. Source: Material Indicators/ Twitter

Extreme fear challenges Bitcoin’s darkest days

Just how nervous traders have become as a result of recent events is showed by the Crypto Fear & Greed Index.

The traditional sentiment indicator fell to 11/100, squarely inside its “extreme greed” zone and its lowest reading since April 2020.

Fear & Greed was at 73, or “greed,” as recently as May 9, making its own decline more of a one-of-a-kind occurrence in the game’s history.

As a result, sentiment against cryptocurrency is currently biassed to the downside, with a reversal of oversold token values anticipated.

“Bitcoin at 40k and appetite for risk is still rock bottom,” popular Twitter account Bitcoin Archive commented on the Index.

“’Buy when others are fearful.’”

Crypto Fear & Greed Index. Source: Alternative.me

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