The cryptocurrency market may be nearing the bottom of its current downturn, but analysts at Compass Point say it will take a broader risk aversion event to boost Bitcoin. significantly lower.
“While near-term risk remains skewed to the downside, we believe we are approaching the final entries of the cryptocurrency bear market,” analysts Ed Engel and Michael Donovan wrote in a report on Monday. “A further downside would likely require a bear market in U.S. equities.”
Their base case calls for bitcoin to bottom between $60,000 and $68,000, an area where long-term holders have shown buying conviction in past cycles. “We see very strong support within this range and our base case assumes BTC bottoms near ~$65k,” they wrote. “Of the BTC owned by long-term holders (more than 6 months), 7% were purchased between $60,000 and $68,000.”
Bitcoin recently broke below $81,000 to as low as $74,532 over the weekend, a level that analysts say reflects the average cost basis for both bitcoin exchange-traded fund (ETF) investors and the broader market. “Bitcoin ETFs have seen net outflows of $3 billion since January 15. With over 50% of ETF AUM now underwater, we see the risk of outflows remaining elevated while ~$81-83k becomes general resistance,” they wrote.
Read more: Bitcoin may still fall further. Historical data shows that $60,000 will be the minimum
‘Air bag’
The price range between $70,000 and $80,000 now presents an “air pocket,” with little structural support above $70,000, according to Engel and Donovan.
“Less than 1% of long-term holders’ supply was purchased within this range,” they said, pointing to the possibility of further selling pressure.
If bitcoin falls below the $60,000 to $68,000 support range, the next stop could be around $55,000, but only in more extreme conditions. “Past bear markets bottomed below the average cost basis for all historical buyers,” they said. That level is currently hovering around $55,000, but “during the 2022 bear market, it took the combination of an equity bear market and several high-profile crypto bankruptcies to break BTC’s average cost basis.”
Read More: Circle’s Biggest Bear Just Thrown in the Towel, But Warns Stocks Remain a Crypto Rollercoaster
