The crypto market may be nearing the bottom of its current slump, but analysts at Compass Point say it will take a broader risk-off event to pressure bitcoin significantly lower.
“While near-term risk remains skewed to the downside, we believe we are approaching the final innings of the crypto bear market,” analysts Ed Engel and Michael Donovan wrote in a report Monday. “Further downside would likely require a U.S. stock market.”
Their base case calls for bitcoin to bottom out between $60,000 and $68,000, a zone where long-term holders have shown buying conviction in previous cycles. “We see very strong support within this range and our base case assumes BTC bottoms near ~$65k,” they wrote. “Of the BTC held by long-term owners (6+ months), 7% were acquired between $60-68k.”
Bitcoin recently broke below $81,000 to as low as $74,532 over the weekend, a level analysts say reflects the average cost basis for both bitcoin exchange-traded fund (ETF) investors and the broader market. “Bitcoin ETFs recorded $3B in net outflows since 1/15. With over 50% of ETF AUM now underwater, we see the risk of outflows remaining elevated while ~$81-83k becomes overhead resistance,” they wrote.
Read more: Bitcoin may still fall further. Historical data shows $60,000 will be the bottom
‘Air pocket’
The price range between $70,000 and $80,000 now presents an “air pocket,” with little structural support above $70,000, according to Engel and Donovan.
“Less than 1% of long-term holders’ supply was acquired within this range,” they said, pointing to the potential for further selling pressure.
If bitcoin falls through the $60,000-$68,000 support area, the next stop could be around $55,000 – but only under more extreme conditions. “Past bear markets have bottomed out below the average cost basis of all historical buyers,” they said. That level currently sits at around $55,000, but “during the 2022 bear market, it took the combination of a stock market and several high-profile crypto bankruptcies to break BTC’s average cost base.”
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