Bitcoin Rebound Raises Caution as Analysts Flag Weak Demand and Downside Risks

Bitcoin’s bounce appears driven by short covering, with analysts warning that weak demand could expose the price to renewed downside.

After a turbulent week marked by high price swings, Bitcoin has posted a slight price recovery. Even at that, market analysts remain cautious about the OG coin’s price movement. As spotted by market commentators, the recent uptick appears to be driven by 

short position closures rather than new buying interest. More so, several technical and on-chain signals suggest selling pressure has not fully eased.

Bitcoin Rally Lacks Conviction as Open Interest Drops, Ted Pillows Warns

Crypto analyst Ted Pillows said Bitcoin’s recent price rise came mainly from short covering. Basically, traders closed bearish positions as the market worsened. In turn, this led to a surge in liquidations, which momentarily pushed prices higher.

As Bitcoin recovered, open interest fell quickly as prices rose, with many leveraged futures positions closed. Generally, such a trend indicates that traders are exiting positions rather than a confident play by new buyers.

A chart posted by Pillows shows that the firstborn coin is flashing weak market signals despite the rebound. Evidently, Bitcoin’s trend remains predominantly southbound, marked by lower highs and lower lows. 

Aggregated open interest falling during a price increase suggests limited new long exposure. Sellers are still in control at current prices, making it unlikely that these levels will hold for long. As such, the downward travel could continue unless spot buyers enter strongly at the current level.

Analyst Highlights BTC’s Bottom Near $34,500

Pillows also reviewed Bitcoin’s position using an on-chain valuation model. He focused on Long-Term Holder Realized Price, which tracks the average acquisition cost for long-term investors. 

The analyst explained that “every $BTC cycle bottom has happened 15% below its Long-Term Holder Realized Price. Right now, it’s sitting around $40,300. A 15% dip means Bitcoin will bottom around $34,500.”

However, Pillows cautioned that such a drop may not occur during this cycle. He added that stronger holder conviction and shifting market structure could keep prices above prior downside targets. 

Image Source: X Ted Pillows

During earlier cycles, the price briefly dipped below LTH cost before forming lasting lows. Often, those moments preceded a decline in the high level of selling frenzy and early stabilization.

At the time of writing, BTC is hovering around $69,447 after rebounding from below $60,000. Even with the recent recovery, BTC’s market structure shows the absence of a sustained trend shift. Short-term moves continue to depend heavily on futures activity rather than spot accumulation.

Ash Crypto Says Bitcoin Shows June 2022–Like Weakness

Another analyst, Ash Crypto, compared recent conditions with those in June 2022 based on structure and momentum. The market commentator said that weekly Relative Strength Index readings have fallen to levels last seen during prior capitulation phases. Typically, such setups are evident during panic selling or near temporary bottoms.

The market commentator identified a break below a key Fibonacci support level. Interestingly, a similar trend appeared during the 2022 crypto winter. And interestingly, the breakdown resulted in accelerated losses as traders reacted to failed support.

Macroeconomic concerns like the weak outing by Hong Kong-based investment vehicles also weighed in on the price trend. As in that period, fear associated with external risk events has again weighed on sentiment.

Ash Crypto predicted a prolonged consolidation phase for the OG coin, citing current market signals. He speculated the price could range between $60,000 and $90,000 for several months. Instead of rapid price rebounds, these phases usually feature sharp swings and lower volatility. Additionally, it comes with slow buying by long-term investors.