Dead cat bounce

The phrase comes from the grim saying that even a dead cat will bounce if it falls from a great height. After a sharp selloff, short sellers take profits and bargain hunters step in, so the price rebounds, sometimes by 20% or more in crypto. If the selling pressure behind the decline is still there, the rebound runs out and the price falls to new lows.

Crypto bear markets have produced many such bounces, including relief rallies after exchange collapses and protocol failures that were followed by deeper drops. Traders watch volume, whether the price reclaims key levels and whether the move is driven by spot buying or short covering to judge whether a bounce has substance.

The label can only be applied with certainty afterward. A real bottom also starts with a bounce, and many traders who dismiss every rebound miss genuine recoveries. Treating a bounce as suspect until it builds higher lows is a more practical approach than predicting either outcome.