Despite the current rebound in the prices of Bitcoin, the recent fall of more than 50% retracement indicates that any reversal must be considered a potential bear market until much higher prices are reclaimed.
After a strong year for Bitcoin in 2020 and an even more powerful start to 2021, expecting only upwards price movement for the digital asset wasn’t exactly feasible mathematically.
Technical indicators showed that a potential bear market was around the corner, but since the market sentiment was so bullish, the bearish signals were ignored. In fact, the recent crypto market selloff on May 19 was so severe that even a few saw it coming.
Currently, Bitcoin’s price is on the rebound having recovered some of its lost gains. However, with such a steep fallback in its price, a trend strength indicator clearly shows that bears are in charge.
The indicator suggests that bears are lurking around and have controlled the leading top cryptocurrency by market cap for the first time since April 2020 and aren’t likely to let go so easily.
Hence, Bitcoin’s recent price rally above $40,000 suggests that there might be a little more than a bull trap.
JPMorgan Chase analysts, led by Nikolaos Panigirtzoglou, have warned of an incoming bear market based on the trends of the Bitcoin futures market seeing “an unusual development and a reflection of how weak bitcoin demand is at the moment from institutional investors.”
In its latest note to investors, the analysts looked at bitcoin futures which have been trading at a discount to the spot price, known as backwardation who use contracts listed on the Chicago Mercantile Exchange, saying:
“We believe that the return to backwardation in recent weeks has been a negative signal pointing to a bear market,”
They pointed out another bearish signal with the cryptocurrency recent fall from 60% to about 40% between April and May. The analysts called this decline in the BTC market share “a bearish signal carrying some echoes of the retail-investor-driven froth of December 2017.”