After dropping to $10,171, Bitcoin continued traversing the low $10,000 range, something that has not happened since July 27. With the benchmark crypto dropping even below $10,000 in some exchanges, analysts assume that Bitcoin’s correlation with the equities market could mean any sharp recovery would not materialize in the same way it did in previous price drops.
Bitcoin closed at $10,267 Sunday after failing to sustain the breach above $10,400 the day before. At the current price level, Bitcoin is 17% below the 2020 high of $12,304, which happened in Aug. 17. Bitcoin traversed the $11,500 in the next 14 days, followed by the final breakdown of the $12,000 level on Sept. 2.
Bitcoin recovery happened fast after previous drops, where a V-shaped recovery was observed by analysts. The V-shaped recovery is referred to a massive price drop followed by a massive bounced, forming a V-shaped pattern in the charts. The last time this happened was in April and May, when 10% pullbacks where recovered within some days.
However, many analysts are not predicting the same type of recovery from the current crash due to Bitcoin’s correlation with the equities market. Crypto analyst Edwad Morra twitted that the worst days could already be behind the market. “Still, Bitcoin recovery can take days to form a good base,” he added.
Speaking with news outlet Coindesk, Stack CEO Matthew Dibbs said the benchmark crypto could still drop below $10,000 depending on the price action in the global equities market. “Macro factors are currently at play, and bitcoin shows a higher correlation to global equities markets in this ‘risk-off’ period,” he told the publication.
Coindesk said that the current sell-off in the stock market may last if the non-farm payrolls report would show that the labor recovery is not on the level it was expected. If the economy doesn’t add more jobs, many investors think people would be back liquidating their positions to turn it into cash. The sentiment extends to Bitcoin, with people possibly liquidating their crypto to cover for important bills. The correlation with Bitcoin is particularly strong with the tech stocks like Tesla, Netflix, Amazon, Alphabet (Google), and Apple.