Bitcoin’s brief bounce doesn’t signal the bottom, analysts warn
With only two days to go in February, the asset is on track to notch its fifth straight month of losses.
Bitcoin almost hit $70,000 on Wednesday, but the rally was short-lived. The asset remains stuck in the $66,000 to $68,000 range, still “waiting for conviction,” as Glassnode analysts put it.
With two days to close the month, bitcoin is down over 13% in February and more than 22% in Q1, its worst quarterly return since 2018, according to CoinGlass.
“Bitcoin remains in a structurally defensive consolidation phase. While price continues to find support within the $60K–$69K demand zone, on-chain profit compression, weak breadth, and moderated large-holder accumulation highlight fragile conviction beneath the surface,” Glassnode analysts said in a report.
They added that an eventual breakout hinges on the intensity of demand from new buyers, which remains subdued, especially among long-term holders.
“Until larger wallets shift toward sustained accumulation, the probability of further downside contraction remains elevated before a more durable bottoming structure can form,” they said.
Nic Puckrin, cofounder of Coin Bureau, told Sherwood News that yesterday’s bounce in no way confirms that the bitcoin bear market is over.
Puckrin said that typically, bear markets last at least a year, and we’ve only had around six months of downward price action. At this point, he said it’s not unusual to see a relief rally, with an upward correction of 20% to 30% before a final sell-off toward bear market lows.
“If this is the beginning of such a relief rally, there are a number of resistance levels on the way up, including $70,900 in the very short term, as well as $74,000 and $79,000,” Puckrin said. “Bitcoin could drop below its current cycle low from any of these points. We would have to see consistent upward momentum, with higher highs and higher lows, for weeks or even months to definitively confirm that the bottom is in.”
CryptoQuant analysts echoed the sentiment, saying that CME bitcoin futures basis compression and falling open interest indicate ongoing leveraging, adding that bitcoin has not yet reached a bottom.
“This [yield curve] flattening reflects softer demand for leveraged long exposure and a reduction in forward risk premium, pointing to weakening bullish conviction and a transition toward a more neutral or bearish market backdrop,” CryptoQuant Head of Research Julio Moreno said in a report.
Moreno said that historically, the progressive flattening of this yield curve reflected waning leverage demand and decreasing forward risk appetite, “with the eventual cycle bottoms occurring only once the slope turned negative.”
“While the current slope compression points to a cooling market, its continued positive reading suggests that positioning stress has not reached capitulation levels,” he said.
Adding to the bearish ongoing sentiment, option traders remain hesitant, “hedging against the risk of a potential slide below $60,000,” CoinDesk reported.
“While the bounce triggered some call buying in the $85,000 to $90,000 strikes, downside skew remains more elevated than upside, suggesting caution,” Sidrah Fariq, head of retail at Deribit, told CoinDesk.
On a positive note, bitcoin ETFs registered $506.5 million in inflows on Wednesday, the largest since February 2, SoSoValue data shows.
Some analysts remain optimistic despite bitcoin’s prolonged downturn, saying the asset is showing more resilience amid multiple headwinds in this cycle.
“The market feels less chaotic this time than during the crypto winter of 2022 when even larger drawdowns occurred, thanks to a more robust infrastructure and a shift in investor sentiment from yield-chasing euphoria to capital protection,” Fabian Dori, CIO at Sygnum, said.
