As Bitcoin price rises, investors worry about dead cat bounce

The extraordinary volatility in the cryptocurrency market after Bitcoin (BTC) slumped to $30,000 has made investors worry about whether the current price action is a “dead cat bounce.” If the dead cat bounces, token prices could drop and set the stage for the next uptrend.

Although BTC price is still down 40 percent from its all-time high of $64,863, the bulls managed to prevent a dip below the $36,000 support several times.

You may be interested in: What is Dead Cat Bounce? How is it understood?

4-hour chart of the BTC/USDT pair. Source: TradingView

A closer analysis of on-chain data and stock flows shows that Bitcoin sales are leading to a market decline. Delphi Digital analyst Nick Pappageorge emphasized that the number of BTC transferred to exchanges exceeded 20,000 in just an hour on Wednesday. This was the highest number seen since March 2020.

BTC flows to exchanges. Source: Delphi Digital

Experienced investors accumulated

While new entrants to the cryptocurrency market have been shaken by the recent surge, more experienced investors have gravitated towards buying BTC at a 50 percent lower price. The number of new savings addresses reached a record level during the correction.

The number of Bitcoin accumulation addresses. Source: Glassnode

In the chart below, Bitcoin analyst PlanB showed how BTC is moving in accordance with the stock flow model and the last correction did not cause any deviations.

BTC price moves according to the S2F pattern. Source: PlanB

PlanB stated:

“Buying opportunities like today are rare.”

The circulating supply of fiat-backed stablecoins has also seen a sharp increase, increasing from 15 billion to 21 billion in the last five days, Delpi Daily reported on May 24.

The stablecoin supply in circulation. Source: Delphi Digital

While this may indicate that bottom buyers are getting ready, it may just be the work of stablecoin arbitrageurs.

The opinions and views expressed herein are those of the author alone and do not reflect the views of Cointelegraph. Every investment involves risk. Do your own research before making a decision.

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