Market Wrap: Bitcoin Close to $30K as Investors Search for a Bottom

Bitcoin (BTC) dropped toward $29,200 before a sharp turnaround that saw the price get close to $30,000 later in the New York trading day. The cryptocurrency has traded in a choppy price range, and so far upside has been capped as some buyers remain on the sidelines.

Meanwhile, alternative cryptos (altcoins) were mixed on Tuesday. Chainlink’s LINK token was up by 7% over the past 24 hours, compared with BTC’s flat performance over the same period. Internet Computer’s ICP token was down by 6% on Tuesday, and Solana’s SOL token declined by 4%.

Sentiment among crypto traders remains bearish, although some analysts and fund managers are starting to search for a price trough in the hopes of recovering from big losses realized over the past month.

“For each cycle we go through in digital assets, the time to accumulate is during the bear markets, and those gains are rewarded exponentially when the bull cycle resumes,” Two Prime, a digital asset investment firm, wrote in an email. The firm expects crypto markers to recover from a slump if BTC returns above $33,000 and ether (ETH) returns above $2,200, roughly 10% and 20% above current price levels, respectively.

Two Prime’s Digital Asset Fund, which also uses derivatives for income and hedging purposes, is expected to post a return of negative 31.4% for May, which largely followed the underperformance of ETH and other altcoins such as SOL. Typically, altcoins decline more than BTC during down markets because of they are considered riskier.

Most indicators suggest bitcoin is approaching the middle or end of a bear market. For example, the realized price model, which is an estimate of the average cost basis of all BTC in supply, is $23,600. Some analysts view that as a key support level, which could indicate a price low.

“Historically, the overall market cost basis or realized price has been a very sound cycle support level, with 84.9% of bitcoin trading days closing above this level. In other words, only 15.1% of trading days have closed below the realized price,” Glassnode, a crypto data firm, wrote in a blog post.

To confirm a low, BTC would need to return above the realized price level, similar to what occurred at the end of previous bear markets. That suggests market participants haven’t fully capitulated yet.

“The bitcoin bear market is not over yet, although it has made a significant part of its way down. The market is full of rumors that short-term buyers have already capitulated,” Alex Kuptsikevich, an analyst at FxPro, wrote in an email to CoinDesk.

Rather, a bull market begins when medium-term investors and even some long-term investors capitulate, which could attract buyers at lower prices, according to Kuptsikevich. BTC is “unlikely to reach this point before the price returns to the highs of 2017 (around $19,800),” he wrote.

Most digital assets in the CoinDesk 20 ended the day lower.

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.