Bitcoin Bounces to $53K After Brutal Sell-Off Reminiscent of Covid Crash

Crypto prices rebounded only a bit with bitcoin (BTC) hitting $55,000 during the U.S. trading session Monday after earlier in the day plunging to just above $49,000.

At press time, bitcoin was trading at $53,000, down 10% over the past 24 hours. The broad-market benchmark CoinDesk 20 Index also posted a similar rebound, but was still 13% lower than 24 hours ago.

Ether (ETH), which saw an even steeper decline exacerbated by large crypto trading firm selling the asset, saw a similar bounce, but remains down 13% for the session.

The rebound happened as U.S. equity markets also cut some of their early-morning plunge, with the Nasdaq lower by 3.6% shortly before the close versus an earlier tumble of more than 6%.

Brutal but typical drawdown for BTC

It was only a week ago when BTC traded near $70,000 with traders ecstatic about a likely Trump presidency and hopes of making the largest crypto a strategic asset. Since then, prices tumbled 30% from peak to trough, making it the steepest decline during this market cycle.

While the action felt brutal, the magnitude of the drawdown was typical during previous bull markets, Alex Thorn, head of firmwide research at Galaxy, noted Monday.

The rapid pace of the drawdown was reminiscent of the Covid-19 triggered crash of 2020, said Daniel Cheung, co-founder of digital asset venture firm Syncracy Capital, even though this was less severe. BTC plummeted 57% in six days in mid-March.

“Expect crypto to recover relatively quickly given most of the selling at this point is forced and complete panic,” Cheung said. “Ironically, the floodgates to a much greater bull market has been opened.”

Matt Hougan, CEO of asset manager Bitwise, also compared this weekend’s crash to March 2020 in a market update.

“It felt as if we might never recover. The media claimed bitcoin had failed its test as a hedge asset,” Hougan said. “Emotions aside, history suggests that this weekend’s sell-off is a buying opportunity.”

While the current situation might offer a good long-term entry, short-term risks are present still. Markus Thielen, founder of 10x Research, said that BTC might dip to as low as $42,000 if the current economic weakness deteriorates further into a recession.