The Bitcoin market is experiencing a severe fluctuation. After falling to a 16-month low of $60,000 on February 6, Bitcoin has recently rebounded, once again surpassing the $70,000 mark. This rebound has led many inexperienced investors to believe they have hit the bottom, but in reality, they are still halfway down the slope. Each round of a bear market typically sees a drop from the peak to the trough over a cycle of about a year, and we are only 5 months into the decline, so it is still very early to reach the bottom.
The recent rebound in Bitcoin appears strong, but is actually based on weak fundamentals. As of February 9, Bitcoin is priced at $70,670, with a daily increase of 2%. This rebound is primarily built on the extreme overselling in the market rather than any improvement in fundamentals.
The fear and greed index is currently only 9 (extreme fear), and although it has slightly rebounded compared to the previous days, it is still at a low level. Such single-digit fear index levels are rare in history; the last occurrence was in June 2022 when Bitcoin was around $17,000, in the historical bottom area.
Despite the price rebound, the fund flows of Bitcoin exchange-traded funds (ETFs) remain pessimistic. After recording a net inflow of about $562 million last Monday, more than $800 million flowed out in the following two trading days. The reversal of fund flows is an important driver of the decline, creating a vicious cycle of 'price drop - fund outflow - price continued drop.'
The core reason for this round of Bitcoin crash is the chain liquidation caused by high-leverage trading. From February 5 to 6, over 570,000 investors globally faced liquidation, with the single-day liquidation amount on February 6 reaching as high as $2.596 billion. High leverage has become an important amplifier of the decline. When the price drops sharply in a short time, trading platforms, to ensure they do not incur losses, forcibly sell off investors' positions, leading to mass liquidations. This passive dumping is the key driver of extreme short-term declines.
From a technical analysis perspective, Bitcoin's trend is not optimistic. The major support level is at $60,000, while the resistance level is at $75,000, and it should oscillate around this position for the next few weeks. After the oscillation, the C-wave decline will begin. The oscillation rebound is not the bottom; the true bottom requires more time to refine.
What brothers need to do now is not to catch the bottom, but to prepare the capital for catching the bottom. When Bitcoin is at $30,000 to $40,000, buy in batches and wait for the bull market to easily multiply several times.
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