Over the past 24 hours, the price of bitcoin has plunged by over 6% against the US dollar following a disappointing August Consumer Price Index (CPI) report.
One question that is undoubtedly in everyone’s mind is whether or not bitcoin has bottomed out.
Prominent crypto analyst and researcher Willy Woo says the cryptocurrency market lodestar is yet to find a proper bottom based on historical trends. This suggests the worst part of the BTC drop may not be over.
How Far Is The Bottom From Here?
Don’t be so sure about those who think bitcoin has already reached a bottom. More pain is coming in the crypto markets.
In Willy Woo’s opinion, the market has not felt maximum pain like it endured during the previous cycle bottoms. Woo estimates max pain by the percentage of coins underwater/unprofitable. Per on-chain data, only 52% of the coins in the market are presently underwater. This is at least 5% lower than it should be to mark the bottom at the current price level.
Bitcoin was hit hard as the inflation data dropped on Tuesday, sliding 6.21% to around $19,983 at publication time. Ether, which is hours away from the much-anticipated Merge upgrade that will see it shift from a proof-of-work consensus mechanism to a faster, more energy-efficient proof-of-stake (PoS) protocol, has lost 0.80% on the day, reaching a present value of $1,603.42.
BTCUSD Chart by TradingView
To this end, Woo noted that history does not repeat itself. But if we get a repeat with the bitcoin max pain hitting 60% of the coins underwater, that bottom price is currently at $9,100.
While Woo suggests we could see a painful new bottom for bitcoin, the dominant crypto’s cost basis is still hovering in the lower range. This simply means BTC may have moved into the final stages of the bear market correction.
After Tuesday’s larger-than-expected inflation figures, the Federal Reserve will likely continue hiking interest rates to cool the economy. Unfortunately, these hawkish Fed actions may continue to rock the frail crypto markets.
Bitcoin is set to rebound strongly once the rate hike cycle is over after the economy has attained the U.S. central bank’s hoped-for soft landing, resulting in the return of investors’ appetites for riskier assets.