Dead Cat Bounce

A “Dead Cat Bounce” is a temporary recovery in the price of a declining asset, such as a cryptocurrency or stock, that is quickly followed by a continued downward trend. Despite a brief rise, the overall trajectory remains bearish, often misleading traders into thinking a market reversal has occurred.

Where the Term Comes From

The term originates from the idea that even a dead cat will bounce if it falls from a great height. It’s used metaphorically in financial markets to describe a deceptive price movement that gives false hope of recovery.

How It Plays Out in Crypto

In the volatile crypto market, Dead Cat Bounces are common after steep declines. Traders might see a short-lived rally and mistake it for a true rebound, only to be caught off guard when prices drop again. Recognizing this pattern helps avoid premature entry into long positions.

Why It’s a Critical Concept

Understanding the Dead Cat Bounce can protect investors from mistaking a temporary spike for a full recovery. It underscores the need for caution, especially in bear markets where emotions and volatility run high.