Bitcoin (BTC-USD) has surged 4% back above $74,000 on Tuesday. But Wall Street analysts caution the recent price action is a rally within crypto’s ongoing bear market as the token sits roughly 40% off its October record.
The recent rebound has been driven by short covering in derivatives markets rather than increasing spot demand, according to Ed Engel of Compass Point.
That means traders who had bet on falling prices have been forced to buy bitcoin to close out their positions, a sign of a short-term move. Meanwhile, spot volumes on crypto exchanges remain near multi-year lows, noted the analyst.
“This dynamic implies tepid underlying demand and keeps us cautious on BTC prices near term,” he added.
Over the past two months bitcoin has fluctuated between $64,000 and $74,000.
“This trading range mirrors prior crypto winters, and we have a hard time seeing BTC break above $78k without a significant catalyst,” added Engel.
The analyst sees a higher likelihood of retesting the bottom end of a $54,000 to $78,000 range.
Meanwhile Fundstrat’s Sean Farrell also sees the upward move as temporary, but with further upside in the near-term after digital asset giant Strategy (MSTR) raised just over $1 billion last week in order to purchase bitcoin.
“On the margin, this would be a pretty big tailwind for bitcoin and by extension, the broader crypto complex,” said Farrell in a client video on Monday night.
“While my base case remains that this is a bear market rally, I am not rushing to fade it,” he added.
Bitcoin snapped a five-month losing streak in March after sliding from its October all-time high above $126,000.
Last month Bernstein analysts said the token “looks bottomed”, reaffirming a price target of $150,000 by the end of the year.
Investor and author of Bitcoin Supercycle Michael Terpin said the token has not seen its crypto winter low yet. Terpin anticipates a drawdown towards the $50,000 or even $40,000 level.
“The market absolutely demands capitulation,” Terpin told Yahoo Finance in a recent interview.
“Because the whales don’t buy back in until they see it,” he added.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
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