The cryptocurrency market appears to be nearing the bottom of its ongoing downturn, with analysts from Compass Point suggesting that any significant decline for Bitcoin will likely be tied to larger trends in the equity markets. In a recent report, analysts Ed Engel and Michael Donovan conveyed a cautious optimism, noting that while short-term risks appear skewed to the downside, the conclusion of the current crypto bear market may be approaching.
Their analysis highlights that Bitcoin’s price could find a bottom within the range of $60,000 to $68,000. This region has historically been marked by strong buying interest from long-term holders, particularly those who have maintained their investments for over six months. Engel and Donovan estimate that 7% of Bitcoin held by these long-term owners was acquired within this $60,000 to $68,000 bracket. They project that Bitcoin is likely to bottom near $65,000, a price level they view as supported by substantial long-term holder activity.
Recently, Bitcoin’s price dipped below $81,000 and reached a low of $74,532 over the weekend, a move that the analysts attribute to the average cost basis for both Bitcoin exchange-traded fund (ETF) investors and the broader market. They also noted that Bitcoin ETFs have seen $3 billion in net outflows since mid-January, with more than half of ETF assets under management currently showing losses. This situation raises concerns that outflows may remain high, particularly as the $81,000 to $83,000 range is perceived as a resistance zone.
Engel and Donovan described the price range between $70,000 and $80,000 as an “air pocket,” indicating a lack of structural support in this area. They pointed out that less than 1% of long-term holder supply was acquired within this range, which could result in additional selling pressure if prices decline further.
If Bitcoin were to fall through the identified support range of $60,000 to $68, the next significant stop might rest around $55,000—though they caution this would likely only occur under extreme conditions. Historically, bear markets have seen prices dip below the average cost basis for all historical buyers, which is currently estimated to be around $55,000. Furthermore, the analysts highlighted that during the last bear market in 2022, it required a combination of an equity bear market and several high-profile cryptocurrency bankruptcies to breach Bitcoin’s average cost basis.
This nuanced perspective reflects the complexities of the current crypto landscape and the interconnectedness of cryptocurrency prices with broader market trends. As investors navigate these turbulent waters, the analyses from Compass Point underscore the cautious optimism and significant risks still present within the cryptocurrency ecosystem.
