Bitcoin stays above $20,000 after a week of forced selling

• Cryptocurrencies show signs of recovery in wake of last week’s crash.
• Several market observers point to preliminary indications that prices have reached a bottom.
• MVIS Cryptocompare Digital Assets 100 index rose 4.9% as of 17:30 GMT on Monday.

In the wake of last week’s crash, cryptocurrencies showed cautious indications of recovery, with tokens like Avalanche climbing and Bitcoin maintaining a price above US$20,000.

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Avalanche gained as much as 9.7 percent on Monday, outperforming other cryptocurrencies such as Chainlink, Polkadot, and Polygon. In London, the MVIS Cryptocompare Digital Assets 100 index rose 4.9% as of 17:30. Bitcoin overcame previous losses to finish the session 0.5% higher.

After a difficult week in which Bitcoin fell below the $20,000 threshold for the first time since late 2020, several market observers point to preliminary indications that prices have reached a bottom — at least for the time being. Glassnode reported on Monday that realized losses on Bitcoin assets reached a record US$7.3 billion last week.

“With forced sellers appearing to drive much of the recent sell-side, the market might begin to eye whether signals of seller exhaustion are emerging over the coming weeks and months,” the report said.

Marcus Sotiriou, an analyst at GlobalBlock, pointed to the Glassnode data to say that “a macro bottom, or temporary bottom, could be close,” according to a note on Monday. He stated that altcoins have not experienced the same “cascade in liquidations” as Bitcoin and Ether, the tokens most commonly utilized as collateral for leveraged bets.

With central banks throughout the world resolutely draining liquidity to combat out-of-control inflation, any market recovery could prove to be temporary. The T3 Bitcoin Volatility Index, a gauge of the token’s predicted 30-day volatility, has returned to mid-May levels when the collapse of the TerraUSD stablecoin shook the cryptocurrency markets.

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“A toxic mix of bad news cycles and higher interest rates has hurt the crypto market and we can anticipate more volatility in the upcoming weeks,” said Feroze Medora, director of APAC trading at Cameron and Tyler Winklevoss’s Gemini crypto platform, in a note on Monday.