The crypto market may be nearing the bottom of its current downturn, but analysts at Compass Point say it will take a broader risk aversion event to push bitcoin. significantly lower.
“While near-term risk remains tilted to the downside, we believe we are approaching the final round of the cryptocurrency bear market,” analysts Ed Engel and Michael Donovan wrote in a report Monday. “Further decline would likely require a bear market in U.S. stocks.”
Their base case scenario sees bitcoin falling to between $60,000 and $68,000, an area where long-term holders have shown buying conviction in past cycles. “We see very strong support in this range and our base case assumes BTC bottoms near around $65,000,” they wrote. “Of the BTC held by long-term holders (6 months and more), 7% were acquired between $60,000 and $68,000.”
Bitcoin recently fell below $81,000 to hit $74,532 over the weekend, a level that analysts say reflects the average cost basis for investors in Bitcoin exchange-traded funds (ETFs) and the market as a whole. “Bitcoin ETFs have seen net outflows of $3 billion since January 15. With over 50% of ETF assets under management now underwater, we see the risk that outflows will remain elevated while around $81-83,000 becomes overhead resistance,” they wrote.
Read more: Bitcoin may fall further. Historical data shows $60,000 will be the lowest level
“Air pocket”
The $70,000-$80,000 price range now presents a “air hole,” with little structural support above $70,000, according to Engel and Donovan.
“Less than 1% of Holder’s long-term supply has been acquired in this range,” they said, highlighting the potential for additional selling pressure.
If bitcoin falls into the $60,000-$68,000 support range, the next stop could be around $55,000 – but only under more extreme conditions. “Past bear markets have bottomed below the average cost basis for all historical buyers,” they said. That level currently sits around $55,000, but “during the 2022 bear market, it took the combination of a bear market in stocks and several high-profile crypto bankruptcies to break BTC’s average cost base.”
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