Cryptocurrency markets may be nearing the bottom of the current downturn, but Compass Point analysts say a broader risk-off event is needed to drive Bitcoin higher significantly reduced.
“While near-term risks remain tilted to the downside, we believe we are approaching the final leg of the cryptocurrency bear market,” analysts Ed Engel and Michael Donovan wrote in a note on Monday. “Further downside may require U.S. equities to enter a bear market.”
Their base case prediction is that Bitcoin price will fall to between $60,000 and $68,000, with long-term holders having shown buying conviction in past cycles. “We see very strong support in this range and our base case assumes a BTC bottom near $65k,” they wrote. “Of the BTC owned by long-term holders (6+ months), 7% are priced between $60-68k.”
Bitcoin recently fell below $81,000, reaching as low as $74,532 over the weekend, a level analysts say reflects the average cost base of Bitcoin exchange-traded fund (ETF) investors and the broader market. They wrote: “Bitcoin ETFs have recorded $3 billion in net outflows since January 15. With more than 50% of ETF AUM currently underwater, we believe outflows remain high and the risk of around $81-83,000 becoming an overhead resistance level.”
Read more: Bitcoin could still fall further. Historical data shows $60,000 will be the bottom
“air bag”
Engel and Donovan said the price range between $70,000 and $80,000 now presents an “air pocket,” while there is little structural support above $70,000.
“Less than 1% of the supply to long-term holders was acquired within this range,” they said, noting that further selling pressure could emerge.
If Bitcoin falls below support at $60,000 to $68,000, the next stop could be around $55,000 — but only if a more extreme scenario occurs. “Past bear markets have bottomed below the average cost base of all historical buyers,” they said. That level is currently around $55,000, but “it took a combination of an equity bear market and several high-profile crypto bankruptcies to breach BTC’s average cost base during the 2022 bear market.”
Read more: Circle’s biggest bear just threw in the towel, but warns stock will remain a crypto rollercoaster
