What is a dead cat bounce in crypto?

What is a Dead Cat Bounce? A dead cat bounce is a term used to describe a sharp, short-term rise in a cryptoasset’s or market’s price that occurs in the middle of a longer-term downtrend.

How to trade Dead Cat Bounce pattern?

The best way to trade the dead cat bounce pattern is by shorting the security. In the case of a dead cat bounce pattern, the price will decline steeply and then will witness a short rally. When the price reaches the opening level or the level from where the decline started, then the chances of falling again increases.

Why do crypto traders fall prey to dead cat bounces?

Unfortunately, many novice traders, especially in the crypto space, fall prey to dead cat bounces as they believe that the assets they buy are on their way to recovery. This is exacerbated by the crypto industry’s lack of regulation, which helps facilitate shady activities like front-running and price manipulation.

Is a relief rally a dead cat bounce?

When markets drop, a relief rally may cause investors to think that the worst is over. However, it could just be a dead cat bounce: a sharp bull run in an otherwise secular bear market.