According to a Monday report by CNBC, an analysis conducted by Bernstein suggests that the recent crypto market surge is due largely to reversion back towards its mean.
Bitcoin (BTC) made a strong comeback to the $23,000 level, kicking off 2023 with an explosive start.
Crypto investing can be a wild and unpredictable ride, but there is a technical chart pattern known as ‘reversion to the mean’ that could help traders stay the course. Reversion to the mean posits that after a particularly significant move in either direction, prices are likely to eventually find their way back to where they were before the big market shift occurred.
This can be caused by investors selling off tokens that may have become overvalued or buying into coins that look like bargains following an especially substantial dip.
Understanding reversion to the mean can enable crypto investors to make smarter decisions during times of volatility. Some market analysts are attributing Bitcoin’s recent price gains, in part, to this chart pattern.
Despite the fact that forecasting an asset’s price with absolute certainty is futile considering all assets are subject to a variety of uncontrollable factors, Bernstein affirms that the recent surge in Bitcoin prices is due to investors’ anticipation of ongoing price increases, following a prolonged bearish period.
Although a few negative events affected the cryptocurrency market, such as Genesis filing for bankruptcy and FTX’s shocking implosion, the report determined that any potential strain on the cryptocurrency markets have eased since most of the expected selling pressure was connected to iliquid crypto investments.
Bernstein emphasized that Bitcoin has never seen two successive years of negative returns since its inception, and recommended being cautious when making bearish predictions in today’s market climate.
Nevertheless, Bernstein does not appear to think that a significant cryptocurrency rally has already kicked off.
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