The worst of bitcoin pullback may be over, a technical analyst says

After president Joe Biden on Monday signed a $1 trillion infrastructure bill into law, both bitcoin and ether slid on Tuesday. The bill contains tax reporting provisions for digital assets and has drawn some criticism from the crypto community regarding its definition of “broker.”

Despite bitcoin’s sharp decline, Katie Stockton, founder and managing partner of Fairlead Strategies, said the firm’s intermediate-term outlook for bitcoin remains positive.

According to technical indicators,  there are already “signs of intraday downside exhaustion” that suggest the worst of the pullback may be over, Stockton wrote in Wednesday notes.

“Short-term oversold conditions are within reach for bitcoin, Ether, and many altcoins, so we would look for their collective pullback to mature later this week,” according to Stockton.

Meanwhile, Mikkel Morch, executive director at crypto hedge fund ARK36, wrote in email that “it is not yet clear whether the drop was a healthy market shakeout of overleveraged longs.”

“Such a shakeout would be the way for the markets to eliminate any short-term structural weaknesses,” Morch wrote. “In such a case, the drawdown would not have done any damage to the macro outlook and we would expect a stronger bounce if broader fundamentals remain positive.”