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Analyst says Bitcoin could see ‘a smaller drawdown and a quicker bottom’

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The cryptocurrency faithful got a reprieve from recent market struggles thanks to a rally in decentralized finance (DeFi) tokens and Dogecoin (DOGE) on June 2. A bit of a breakout in the price of Ether (ETH) and Bitcoin (BTC) may have also lifted sentiment, but at the moment, the top-ranked digital assets are still meeting pushback at key overhead resistance levels. 

Data from Cointelegraph Markets Pro and TradingView shows that the price of Bitcoin rallied 7.3% from a low of $35,645 on June 1 to an intraday high at $38,250 on June 2, and Ether saw a similar-sized gain of 7.7% to briefly regain the $2,800 support level.

While the uptick in prices has many calling for a continuation of the 2021 bull market, some analysts have highlighted a possible bearish pennant formation on the Bitcoin chart, which could result in a price breakdown to as low as $16,000.

Bitcoin pennant structure and its primary downside target. Source: TradingView

Market top or bull market breather?

Bitcoin’s unstable value motion over the previous month has led many to invest on whether or not the highest is in for BTC or the present correction is simply a mid-cycle breather that can put together the asset for continuation as soon as the rally resumes. 

Deeper perception into the matter was supplied in a latest Delphi Digital report that mentioned the MVRV ratio, an on-chain metric that measures Bitcoin’s market worth (MV) towards its realized worth (RV) as an indicator that may assist merchants decide market tops and bottoms.

Bitcoin MVRV ratio vs. value. Supply: Delphi Digital

The chart above reveals that the MVRV ratio turned overextended in early 2011, late 2013 and early 2018, “all of which represented cycle tops,” as highlighted by Delphi Digital. The researchers additionally instructed that “May 2021’s reading could very well indicate the top for this cycle.”

Whereas it’s doable that the highest could also be in for the present cycle, Delphi Digital additionally famous that there’s the potential for the market to “see an outcome that resembles 2013’s ‘double bubble’ where BTC made an ATH [all-time high], price fell hard, and then recovered well past the ATH in the same year.”

The report additional highlighted the truth that the edge for figuring out Bitcoin’s backside has elevated over time, which could change the panorama of bull markets within the years forward.

In line with Delphi Digital:

“Given the steep drop in MVRV so far, it’s possible that BTC could see a smaller drawdown and a quicker bottom than in previous cycles. This would resemble something like global equities, which have multi-month corrections and multi-year bull cycles.”

As a word of warning, the report did level out that whereas “There’s a lot of conflicting data and sentiment” available in the market presently, there’s prone to be “an episode of mean reversion in coming weeks as price deviated far from its 50 day moving average.”

BTC base case: imply reversion. Supply: Delphi Digital“Historically, BTC price has been fairly close to its 50 day MA. And looking at previous drawdowns, BTC has always posed a healthy relief rally after a deep retracement. This is a result of natural market reflexivity.”

Altcoins stage double-digit rallies

Altcoins notched double-digit features throughout June 2’s value motion, led by a 53% achieve within the value of Kyber Community’s KNC token, which is now again above $2.50. KAVA additionally secured a 37% rally and presently trades close to $4.70.

Day by day cryptocurrency market efficiency. Supply: Coin360

Dogecoin, Kusama’s KSM token and Curve DAO’s CRV token additionally helped lead the altcoin cost, with value rallies round 25%, whereas OKB placed on a 33% achieve and trades close to $17.70.

The general cryptocurrency market capitalization now stands at $1.709 trillion, and Bitcoin’s dominance charge is 41.5%.

The views and opinions expressed listed here are solely these of the writer and don’t essentially mirror the views of Cointelegraph. Each funding and buying and selling transfer entails danger, and you need to conduct your individual analysis when making a choice.

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