Bitcoin plays between $30k to $39k for the past week. Last Saturday, it hit $30k during the crypto bloodbath, which left altcoins suffering from the aggressive price changes. On Sunday, however, the crypto market saw a great recovery as it increased by $3,000, recovering $100 billion in just a day.
Although it may seem a good opportunity to go for short-term trading, a JPMorgan strategist is not in favor of this strategy. “There is likely still an overhang of underwater positions which need to be cleared through the market,” he said.
JPMorgan cites the stability of the Bitcoin futures market and the potential for higher production costs due to miners’ migration from China as favorable considerations. Production costs of Bitcoin are historically linked to its price, as shown by numerous studies. A price spike in mining costs may therefore raise Bitcoin’s price.
This suggestion indicates that the bitcoin market seems to start a recovery process but that it’s not yet fully healthy. David Grider of Fundstrat suggested that risk be reduced, or investors work on protecting their trades.
Some investors might have profited from the recent price movement, but profits are never guaranteed for all. The crypto market has always been this volatile. If your trading plan doesn’t involve trading Bitcoin for a short period, then you should stick to it. Waiting for the crypto market’s full recovery is a better strategy than risking your money in today’s unstable crypto state.