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

Cryptocurrency prices have only slightly recovered after Bitcoin ({{BTC}}) reached a high of $55,000 during the US trading session on Monday, having climbed to just above $49,000 earlier in the day.

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

Ether {{ETH}}, which saw an even bigger drop as major cryptocurrency trading firms sold the asset, also experienced a similar jump but remained down 13% throughout the session.

The recovery came as U.S. stocks pared their morning declines. The Nasdaq fell 3.6 percent just before the close. It had previously fallen more than 6 percent.

A brutal but typical drop for BTC

It’s been just over a week since BTC traded near $70,000, with investors excited about a possible Trump presidency and the prospects of turning the largest crypto into a strategic asset. Since then, prices have fallen 30% from peak to trough, the steepest decline in this market cycle.

Alex Thorn, head of companywide research at Galaxy, said on Monday that while the action felt sharp, the magnitude of the decline was typical of previous bull markets.

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

“Expect the cryptocurrency to recover relatively quickly given that most of the selling right now is forced and outright panic,” Cheung said. “Ironically, the floodgates have opened for a much bigger bull market.”

Matt Hougan, CEO of asset management firm Bitwise, also compared this weekend’s crash to the crash in March 2020 in his market update.

“It felt like we were never going to recover. The media claimed that bitcoin had failed the test as a hedge asset,” Hougan said. “Setting aside sentiment, history suggests that this weekend’s sell-off was a buying opportunity.”

While the current situation may offer a good entry in the long term, there are still short-term risks. Markus Thielen, founder of 10x Research, said that BTC could fall to as low as $42,000 if the current economic weakness worsens and turns into a recession.