Is this a Crypto dead cat bounce?
Analyzing what happened on this drawdown, and if this is the beginning of more pain for Crypto markets
Last week Crypto markets took a bath, and market participants have reverted back to pessimism after a few weeks of glass-half-full energy.
The move was painful and violent, as many altcoins fully retraced their breakout moves.
This breakdown has many asking the obvious questions: was that it? Was that our dead cat bounce?
In today’s article I’ll address what happened, how the market has responded, and what my ultimate take is on the markets moving forward.
LETS GO.
All charts available on Dude Terminal.
TLDR
• Crypto markets experienced a violent deleveraging event last week, with many altcoins fully retracing their breakout moves and sentiment quickly swinging back toward pessimism.
• The key BTC level remains the $76K–$80K range. Bulls need to reclaim this area convincingly, while a sustained loss of $75K–$76K would likely warrant a far more defensive stance.
• Several cautionary signals had been flashing before the drawdown:
low volatility + mean reverting conditions,
overheated short-term breadth,
extended trend duration,
and elevated open interest.
• The selloff appears to have successfully flushed late buyers and excess leverage from the market, with funding rates for the most crowded perpetual swap pairs resetting back toward neutral.
• Portfolio positioning has been significantly derisked, with memecoins sold across the board. Remaining altcoin exposure is concentrated in HYPE, ZEC, and NEAR.
• My current base case remains cautiously bullish: this looks more like a leverage washout than a confirmed structural breakdown — but the next few weeks will be critical for determining whether crypto can regain momentum into month-end.
VIDEO VERSION OF ARTICLE
No video version of article for today.
Friday will be a video for this article and my updated thoughts on the market from this week’s price action!
MARKET ANALYSIS
From a technical perspective the “Bears First Wall” has done its job thus far by keeping price pinballing between $76,000 and $80,000.
I’ve said this before and I will say it again: this is the area that needs to be conquered by bulls. If BTC price gets to the “Bears Second Wall”, my guess is that it won’t operate as comparable resistance to this $80,000 level.
If BTC convincingly loses the $75,000-$76,000 price point there’s reason to start positioning very defensively.
I’ve shared this chart a lot over the past few weeks / months.
Today I want to mention something that I need to also remind myself:
Low volatility environments are the home of mean reverting price action. And as is self evident in the chart above, there still hasn’t been a breakout in volatility in Crypto markets.
If volatility isn’t on the menu yet, you need to be extra careful trading high volatility assets like memes or AI coins. I made this mistake and roundtripped a bunch of profits.
There were other cautionary signals that I ignored, and returns breadth was one of them.
In most cases large 30-Day breadth prints result in sideways at a minimum. Being all-in and with a skew towards higher beta assets is dangerous in these cases, especially when paired with low volatility prints.
Trend duration had also reached a historical tipping point.
30 days of consistent 30D % returns is a late rally period to get long.
This metric reset on this drop - any resumption of uptrend will be starting with fresh wheels if we get it.
Open interest was also elevated before the drawdown - signaling that enough offsides levered capital had been absorbed into the market to properly flush it.
There is no requirement for this metric to hit the bottom green band before bottoming, but we’ll have to see what the market presents us with.
An interesting datapoint is that this was the third deleveraging event since October 2025.
The negative sentiment on Twitter seems reflective of this.
The funding rate for the most expensive perpetual swap pairs on Bybit got knocked back to flat on this deleveraging event.
The biggest bulls were silenced on this move - if you have a bullish bias this is a good signal that there’s been a fair amount of pain inflicted.
On the other hand, if this remains flat while prices languish for another week or two then it’s time to assume that risk appetite has left the building.
This chart is for the bulls / dip buyers out there - the worst performing assets had 7D return prints that have generally bounced prices since early February.
PORTFOLIO UPDATES
The Levolytics books was derisked on this dump bigly - with Memecoins sold across the board.
Remaining Altcoin positions are HYPE, ZEC, & NEAR.
The losses from the altcoin dump fully absorbed everything earned on the way up.
This is naturally annoying after almost getting back to -20% ITD.
CLOSING STATEMENT
If you ever want my true opinion on markets, just ask where I’m allocated.
As you can see in the portfolio section, my sights are still focused upwards on the BTC chart.
I’d say my confidence level is 68% (i.e. the percentage of Levolytics portfolio that’s allocated to Crypto)
My hunch is that this was a washout of late buyers / leverage traders, and that the market will resume its uptrend going into month-end.
Is there a chance I’m wrong? Always. But I want to see more from bears before I start positioning extremely defensively.
DISCLAIMER
The performance results presented herein reflect proprietary trading activity conducted with internal capital only. No external capital is managed, accepted, or solicited. These results are unaudited and are provided solely for informational and research purposes.
Performance data represents the return on internal capital based on realized and unrealized gains and losses, net of trading fees and transaction costs, but before any taxes or potential operating expenses. The methodology used to calculate performance has been applied consistently; however, results have not been verified by any independent party.
Past performance is not necessarily indicative of future results. All investments involve risk, including the potential loss of principal. The information contained herein does not constitute an offer to sell or a solicitation of an offer to buy any security, investment fund interest, or other financial instrument.
Any opinions, estimates, or forward-looking statements are subject to change without notice and are provided for illustrative or educational purposes only.