Bitcoin price retakes $36,000 as the crypto market stabilized after last week’s correction

Bitcoin price surged to $1,834 in just four hours after it briefly hit $34,000. After the broad market correction down over the past week, the overall crypto market is stable. At the time of writing, Bitcoin is currently changing hands at around $36,145 and is up slightly over the past 24 hours.

bitcoin-price-retakes-36000-as-the-crypto-market-stabilized-after-last-weeks-correction

BTC/USD 4-hour chart | Source: TradingView

Bitcoin price stabilizes as altcoins underperform

While BTC and the crypto market appeared to be following the stock market’s performance recently, the relationship between bitcoin and the Nasdaq 100 stock index, the favored proxy for the tech sector, remains weak – a reminder other more important factors could affect BTC and the crypto market. Major stock indices tumbled earlier in the day as investors closely watched the Federal Reserve’s first meeting this year, which will take place this week. The U.S. equity market also rebounded in the late afternoon on Monday.

BTC returned above $36,000 after multiple oversold signals appeared on the charts. The cryptocurrency faces initial resistance at $40,000, limiting upside over the short term. It is up 3% over the past 24 hours after rising from an intraday low near $33,000, while the broader crypto market has stabilized.

The daily chart’s Relative Strength Index (RSI) registered the most extreme oversold reading since the March 2020 crash. The previous extreme low was on Nov. 20, 2018, which preceded a few months of rangebound price action before a rally. For now, a downtrend of lower price highs since November remains intact, which means sellers could remain active at resistance levels.

“Are traders switching from FUD-mode to FOMO-mode in just a single day? After Sunday’s bloodfest of negative trading returns, Monday has rebounded well for BTC, ETH, and alts. This has led to the biggest portion of buy calls in over a month”, Santiment stated.

bitcoin-price-retakes-36000-as-the-crypto-market-stabilized-after-last-weeks-correction

Source: Santiment

Nearly $700 billion of value was erased when the market correction sent BTC down 28% for the year, and Ether (ETH) fell 40%. The new figures imply cryptocurrency market capitalization has roughly halved since its all-time high, around $3.1 trillion in November.

It’s not unusual for highly volatile cryptocurrencies to experience swift and devastating drawdowns with magnitudes exceeding 50%. In April 2013, the price of bitcoin rallied to a high of $230 from just $13 in January. Within days, bitcoin suffered a steep drop to $68, a decline of 70%.

The last crypto bull run in 2017-2018 saw a similar pattern – a swift, parabolic price pump, then a steep drawdown within subsequent weeks. During the 2018 sell-off, crypto market capitalization plummeted from a high of $850 billion in January to $130 billion in December, a staggering decline of 85%.

It took three years for bitcoin to return to its 2017 all-time high, marking a painful period veteran HODL-ers remember as “crypto winter.” While the drawdowns vary in magnitude with each subsequent crypto cycle, it appears the “supercycle” hypothesis – that crypto is on the verge of mass adoption – floated by some traders last year is dead in the water.

As the cryptocurrency space matures, bitcoin and ether dominance has declined, meaning altcoins are making up a larger chunk of the broader cryptocurrency market cap.

Tokens such as Fantom’s FTM (-21% year to date) and Cosmos’ ATOM (-7%) have outperformed both bitcoin (-28%) and ether (-40%). Traders who were long FTM and ATOM and hedged positions with short selling on BTC or ETH could still make profits. Short selling occurs when an investor borrows security (or, in this case, a cryptocurrency), sells it on the open market, and expects to buy it back later for less.

Meanwhile, some of 2021’s hottest tokens, such as Polygon’s MATIC (-44%), Solana’s SOL (-51%), and Avalanche’s AVAX (-48%), have notched steep losses in less than a month. The overall cryptocurrency market cap stands at $1.624 trillion, and Bitcoin Dominance is 42.1%.

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