Is this a market rally or a Dead Cat rebound?

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Market-wide portfolio risk reduction and selling pressure in the global crypto market showed no signs of stopping as the total crypto market cap fell to $1.51 trillion on Jan. 22, up from more than $2 trillion a week ago. The price of Bitcoin slipped below $35,000 and Ethereum fell to the $2,300 price level from the $40,000 and $3,000 levels (7 days back) respectively. Nonetheless, a new week appeared to be healing recent losses as Bitcoin noted minor gains, while altcoins appeared to rally.

A recovery in progress?

Total crypto market volume in the past 24 hours was $108.76 billion, which is a 27.20% decline from the previous day, while total DeFi volume stood at $108.76 billion. $16.46 billion. On the other hand, the global crypto market capitalization was finally above $1.67 trillion, registering an increase of 3.05% in the last day.

That said, BTC gained 1% in price and traded at $35,695.83, while Ethereum rose 2.75% in the past 24 hours to finally break above $2,500, at the time of the writing. The two main assets presented a slight rise in price which relieved market participants after the rather choppy action. However, the biggest gainers were altcoins like Terra (LUNA) which rose by 12.58%, Shiba Inu which gained a staggering price of 17.93% and Cosmos (ATOM) which rose by 11.32%. in 24 hours.

With altcoins gaining strength and Bitcoin noting minor gains, the market ultimately felt optimistic about the coins’ trajectory. But is it really a recovery or another fake-out that will be followed by further losses?

Dead cat bounces in game

While it makes sense to be optimistic about further gains as the market eyes some kind of recovery, is a recovery really in play, or is it just a dead cat bounce?

In finance, the dead cat bounce is used to describe a short-lived recovery after a prolonged decline. It usually appears as a small rally after a continuous downward price trend. At first, the price rebound appears to be a reversal of the prevailing trend, but it is quickly followed by a continuation of the price decline. In the case of Bitcoin, the dead cat bounce theory resurfaced after BTC’s recent rally, however, looking at the asset’s negative funding rate, it was clear that traders are expecting higher prices. low.

While Bitcoin’s consolidation may act in favor of decoupling altcoins from BTC and the broader market trajectory for now, it will come as no surprise if further losses follow. That said, the next bearish levels to watch for BTC would be $32,000, then $30,000 and $28.9,000.

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