Bitcoin Relief Rally Raises Caution: Analysts Warn of Potential Dead Cat Bounce

The cryptocurrency market has seen a slight uptick, increasing by over 1.8% in the last 24 hours, with Bitcoin (BTC) and most of the top 20 cryptocurrencies showing positive movement.

Key Takeaways

Bitcoin has seen a relief rally, but analysts caution it may be a "dead cat bounce."
Critical price levels, particularly $98,000, will determine Bitcoin's short-term movement.
Market sentiment remains mixed, with some analysts expecting further declines and others predicting a rise past $100,000.
The next few weeks will be vital in establishing Bitcoin's market direction.

Despite this recovery, analysts caution that this bounce could just be a temporary respite, often referred to as a "dead cat bounce," which occurs during a larger overall decline.

Analysts Highlight Possible Dead Cat Bounce in Bitcoin

Based on data from BeInCrypto Markets, Bitcoin rose to a peak of $89,000 on Monday after experiencing a recovery over the weekend. However, as of the latest updates, the price has adjusted to $87,755, reflecting a modest increase of 0.23% over the past day.

Bitcoin (BTC) Price Performance. Source: BeInCrypto Markets

Yet, technical analysts are exercising caution. Crypto analyst Elja examined Bitcoin's technical layout on the weekly chart after the drop to $82,000. He emphasized that short-term rallies following steep declines often lead traders to have false hopes about the return of a bull market. According to Elja, the $98,000 mark is critical for Bitcoin's near-term direction.

“Typically, after a significant drop, a quick relief rally occurs, akin to a ‘dead cat bounce,’ which does not necessarily indicate the imminent return of a bull market. Watch closely around the $98,000 level. It has previously acted as support but may now become resistance,” the analyst advised.

Elja cautioned that failing to maintain above $98,000 could likely indicate a bearish trend, which might cause Bitcoin to slide further towards the $75,000 support level. Conversely, if Bitcoin manages to close above $98,000 on a weekly candle, it could counter the dead cat bounce theory and hint at renewed bullish momentum.

Weekly BTC/USDT Chart. Source: X/Eljaboom

Market analyst Ted Pillows described the latest price surge as merely a “relief bounce” rather than a genuine shift in market sentiment. He observed that while brief increases can rekindle hope among traders, this optimism typically dissipates quickly in a strong negative market environment, emphasizing that the overall trend remains downward.

Market commentator Titan of Crypto pointed out that Bitcoin is responding strongly at the Senkou Span B (SSB), the lower boundary of the bullish Ichimoku Kumo cloud. He warned that even if a price increase occurs, it is “likely to be a dead cat bounce,” mirroring patterns witnessed in 2022. Titan remarked that the bearish outlook would only be reversed if Bitcoin completely reclaims this cloud and maintains its position above it.

Additionally, another market observer noted the potential formation of a head-and-shoulders pattern on Bitcoin’s monthly chart, a classic bearish indication that may suggest trend exhaustion and a possible deeper reversal if the neckline is broken.

Meow??? How high can the cat bounce?
— Peter Brandt (@PeterLBrandt)

However, not all analysts share this perspective. Analyst Peter Anthony believes that even as Bitcoin moves towards the $100,000 level, traders will continue to categorize every rally as a “dead cat bounce.” While he acknowledged the potential for a correction back to previous highs, he holds that bearish predictions may ultimately prove inaccurate.

“The dead cat bounce will be false, and many will start FOMO-ing once Bitcoin breaks above $115,000. This implies that most traders who sold during last week's downturn took maximum losses and will be waiting to buy once recovery begins,” Anthony stated.

BeInCrypto has also reported a growing sentiment among analysts who believe that the worst may be over for Bitcoin, suggesting that the coming weeks will be crucial in determining its market trajectory. Whether Bitcoin's upward momentum continues or if it experiences further downturns remains a key focus.