Bitcoin’s strong sell-off may finally have run its course, according to Geoffrey Kendrick, head of digital assets research at Standard Chartered, who says the pullback is following a familiar pattern and is likely close to being exhausted.
Bitcoin plunged below $90,000 on Tuesday, extending a pullback that erased nearly 30% of the currency’s all-time high above $126,000 set in early October. The latest drop marks the biggest pullback since spot bitcoin ETFs were introduced in the United States last year, and has sparked debate over whether the largest cryptocurrency is entering the bear market phase of its typical four-year cycle.
“I view the recent sell-off as nothing more than a (quick and painful version) of the third in recent years, almost exactly of the same magnitude,” Kendrick wrote in a note to clients Tuesday.
As part of his thesis, Kendrick highlighted key sentiment and valuation indicators that are now reset to levels historically associated with market lows. One of them is treasury company Bitcoin Strategy’s (MSTR) modified net asset value (mNAV) – a measure of the company’s bitcoin holdings relative to its stock price – which has fallen to parity at 1.0.
“A number of other metrics have collapsed to absolute zero levels,” he said, suggesting seller exhaustion and capitulation. “This is enough to mean that the liquidation is complete.”
“A recovery towards the end of the year is my base case,” he concluded.
His outlook echoes recent comments from analysts at crypto exchange Bitfinex. They noted that the pace of losses realized by short-term holders began to slow with the emergence of on-chain capitulation signals, typical markers of the formation of a market bottom.
BTC rebounded to just under $93,000 on Tuesday, up 3.8% from overnight lows.
