Bitcoin Risks a 2021-Style Dead Cat Bounce

Bitcoin (BTC) may be tracing a familiar and uncomfortable pattern with a structure that closely resembles its 2021 market cycle, a period that featured a ‘dead cat bounce’ before the price resumed a deeper decline.

The comparison, shared by renowned cryptocurrency trading specialist Ali Martinez in an X post on December 30, highlights a short-lived recovery attempt forming after a major drawdown, followed by renewed downside once support failed to hold.

While history doesn’t repeat perfectly, the structural similarities are enough to put traders on alert.

What a Dead Cat Bounce Implies

A dead cat bounce refers to a temporary relief rally that occurs after a sharp sell-off, often driven by short covering, bargain hunting, or fading panic rather than a genuine trend reversal.

These bounces can look convincing on lower timeframes but typically lack follow-through. Once buying pressure fades, price often rolls over and continues in the direction of the broader trend.

In 2021, Bitcoin staged a comparable bounce before breaking decisively lower, turning what appeared to be stabilization into a trap for late buyers.

Why the 2021 Comparison Matters Now

Martinez’s side-by-side comparison shows BTC forming a similar consolidation structure beneath a key support zone, with price action compressing before the next directional move.

Key similarities include a sharp drawdown followed by a choppy rebound, failure to reclaim prior support with conviction, and compression suggesting another volatility expansion ahead. In 2021, that setup ultimately resolved to the downside.

Short-Term Relief vs. Structural Weakness

For the time being, Bitcoin is changing hands at the price of $87,889.65, which represents an increase of 0.02% in the last 24 hours, a 0.54% gain across the previous seven days, and a loss of 3.78% accumulated on its monthly chart, per the most recent information.

The current bounce doesn’t automatically signal a market top or guarantee a repeat outcome. However, it does reinforce the idea that short-term strength can coexist with longer-term vulnerability.

Dead cat bounces are most dangerous when sentiment improves just enough to restore confidence, but not enough to repair market structure. That’s often when positioning becomes skewed, and downside accelerates.

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