Optimistic periods in the market have always been preceded and followed by pessimistic or bear market conditions, hence the cyclical nature of the economy which is much more volatile due to the disruptive and digital currencies. The Ethereum in particular posted gains of9% after a disappointing string of losses. However, there is still unpredictability and the gains probably were short-lived and the major indexes continued their downward march. This chart illustrates just where the cat bounced, how high it bounced and then how far it continued to fall.
Since June, ETH, the built-in cryptocurrency of the Ethereum blockchain network, has been on a constant downtrend, performing remarkably poorly against Bitcoin.
Now after a nosedive moment and the resilience of Ethereum led to the price surge of others tokens: Decentraland (MANA), VeChain (VET), WanChain (WAN), Aion (AION), ICON (ICX), and 0x (ZRX) activated and increased by 10 to 20 percent.On September 13, ETH has shown the recovery after a hard time in the sub-$200 region, returning to $188 by recording a rock-solid 9 percent increase in price.
Dead Cat or Market Reversal?
However, after a long sustained decline, the market can either undergo a bounce, which is short-lived or enter a new phase in its cycle, wherein the usual direction of the market undergoes a sustained reversal as a result of changes in market perceptions. For example, Bitcoin has slightly increased by 2% over the past 24 hours’ period which is now at $6,400. The corrective rally of September 13 was caused by extremely oversold conditions, which does not necessarily lead to an amidst rally or a complete trend reversal. Also, throughout September, the rest of the market, which experienced extreme instability indicated upward movements.
A cryptocurrency trader and an economist Alex Kruger elucidated the facts by mentioning that “it is very much possible for Ethereum and the rest of the market to continue their recovery in the upcoming days but suffer another drop on the downside.”
Since February, till date Bitcoin has shown steadiness in the low price range while others such as Ethereum, Bitcoin Cash, Ripple, and small market cap cryptocurrencies have struggled to show flexibility and recovery.Kruger explained: “The direction of ETHUSD depends on BTCUSD. If BTC breaks $6,400next levels are $6,600 – $6,650 and $6,850. ETH would break up much harder. Temporarily. Then expect selloff to resume, BTC to break the year lows, hellfire among alts, and ETH weaker than competing tokens.”
It is crucial to understand that a dead cat bounce can affect investors in very different ways, depending on their investment style.
A dead cat bounce is not manifestly a bad thing; it really depends on your perspective. For example, you won’t hear any complaints from day traders, who look at the market from minute to minute and love volatility. Given their investment style, a dead cat bounce can be a great money-making opportunity for them. But this style of trading takes a great deal of dedication, skill in reacting to short-term movements and risk tolerance.