Bitcoin Price Surge Vs Dead Cat Bounce: Is BTC Really Recovering?
For people who held Bitcoin through the recent Bitcoin price crash of December 22rd, rebounding prices on December 23rd, were cause for celebration. It takes real digital currency stamina, after all, to hold on to digital assets as market prices swing from $20,000 to lows of $10,000.
Sadly, the current Bitcoin price falling from $16,000 to $14,000 so soon after recovery, might be indicative of even bigger pull-backs. In fact, Bitcoin and altcoins like Ethereum may well be in what the wider financial markets refer to as a ‘Dead Cat Bounce.’
What is a Dead Cat Bounce & Is Bitcoin in One?
In layman’s terms, a ‘Dead Cat Bounce’ is a sudden rebound in a cryptocurrency or (or similar asset price) following a just as sudden shedding of value. More specifically, such bounces are caused by new investors attempting to take advantage of low market entry points without realizing that stock (and in this case digital currency like Bitcoin) might be about to bottom out entirely.
Why is it Likely That This is What we are Seeing With the Current Bitcoin Price?
One of the key calling cards of a Dead Cat Bounce, is overall market hysteria and irrationality. What is more, such irrationality has been pervasive throughout December 2017. Recently launched digital currency Cardano (ADA), for example, rose this month by over 260%, to become the 6th biggest cryptocurrency by market cap, despite being listed on only three cryptocurrency exchanges.
Of course, Cardano does have a lot of potential merits as a cryptocurrency token. Perhaps the best evidence, however, of digital currency market irrationality, can be seen by looking at what actually happened during the December 22nd Bitcoin price pull-back.
Serious Investor Cash Isn’t Flowing Toward the Assets it Should Be
It is no coincidence that Bitcoin, Ethereum, Litecoin, and other altcoin prices have all fallen in tandem with the launch of CME Bitcoin futures trading on Wall Street.
Futures trading by the likes of CME and COBE, now make it possible for people to profit from Bitcoin price pull-backs. Needless to say, this alone makes cryptocurrency market prices more volatile. At the same time, however, futures trading also means that more scrutiny is likely to start falling on different digital currency use cases.
What is more, this is arguably why Dash Coin and Ripple XRP survived the December 22nd cryptocurrency market crash relatively unscathed.
The Big Dash Coin & Ripple XRP Dead Cat Warning Sign
Actually increasing in value as Bitcoin lost a third of its value, Ripple XRP and digital currency offerings like Dash Coin, both have scalable blockchains which are ready and waiting to be put to the test in real-world retail contexts. In fact, Ripple XRP is already being embraced by many major real-world banks and retail payment providers.
Worryingly, however, in the wake of December 22nds Bitcoin price retreat, new investment capital didn’t start flooding into Dash Coin and Ripple XRP as one might logically expect it to.
Instead, investment capital has been surging back into Bitcoin, Litecoin, and Bitcoin Cash, without any real reason other than suddenly lower digital asset prices.
Could the Current Bitcoin Price Fall Back to $6,000?
Given that a number of Bitcoin and altcoin whales (including Litecoin founder Charlie Lee) have just left the market, it is safe to say that confidence in Bitcoin is starting to falter.
A much bigger problem for the cryptocurrency market at present, however, lies with the fact that new investors rushing to buy Bitcoin and altcoins like Litecoin could exasperate overall market uncertainty. – Specifically by panic selling should the current Bitcoin price start to retreat back from $14,000.
Of course, Bitcoin and the cryptocurrency market overall might not be in a Dead Cat Bounce. It is worth remembering, however, that Bitcoin’s last stable price until late November rested at a just $6,000. This being the case, while long-term investors should continue to hold, a smarter move for new to market investors would be to invest (at least or the time being) in much less volatile altcoins like Ripple XRP and Dash.