The price of bitcoin has hit $20,270 today, marking a 7.5% rise over the cryptocurrency’s 24-hour-low of $18,858. Surprisingly, the jump comes amid continued negative sentiment in global markets, with the Dow Jones entering a technical bear market following a 1.1% decline yesterday, which completed a 20% fall compared to peaks witnessed in January.
Analysis suggests that increases in spot trading volume are largely responsible for BTC’s push upwards, with its descent to support levels of around $18,500 helping to incite a rebound. However, with the macroeconomic picture remaining decidedly uncertain, it may not be the best possible time to buy, even if passing through the $20,000 barrier may indicate a short-term breakout.
Bitcoin Price Rockets 8% to $20,270
The past week hadn’t been kind to Bitcoin or the cryptocurrency market in general. BTC sank to a seven-day low of $18,424 on Thursday, and despite a short-lived rebound on Friday, it hovered around the $19,000 level until very early this morning.
BTC’s indicators have shown an uptick yet remain far from running out of steam and moving into overbought territory. Its relative strength index (in purple) has gone vertical in the past few hours, moving beyond 50.
That said, its 30-day moving average (red) is still comfortably below its 200-day average (blue). While this means the current movement could still continue, it also suggests that BTC has yet to enter a real breakout.
Still, with the market being subdued for so long, analysts are treating this morning’s movement as evidence of some kind of small-scale breakout.
While analyst Michaël van de Poppe suggests the BTC price may see some consolidation before rising again, he also predicts an increase towards $23,000 (and beyond) in the near term.
Van de Poppe highlights a “ton of spot volume” as the immediate cause of BTC’s rally today. Of course, the real question is what caused such an increase in volume, with stock markets falling as a result of continuing negative investor sentiment.
A simple answer to this conundrum is that, while the bitcoin price and the cryptocurrency market, in general, have already fallen steeply from last year’s highs, stock markets have yet to really register a downturn proportionate to the macroeconomic environment.
The Dow Jones only just entered a bear market yesterday, while the S&P 500 is down by 23% compared to its peak in January, a percentage which seems small in comparison to BTC’s 71% decline from its ATH.
By contrast, it’s arguable that Bitcoin has already hit its bottom. It’s now trading at a massive discount compared to former highs, so it’s possible that its market has begun to pick up a little already since its support level of around $18,000 means it can’t really go much lower without a serious macroeconomic shock.
In other words, with BTC still comfortably below its four-year average price, investors are looking to buy it cheap.
Where BTC Goes From Here
Given how uncertain the economic picture is right now, it’s not surprising to find that there’s divergence on what exactly today’s movement means for the bitcoin price going forward.
Some analysts regard the bounce as a bullish divergence, implying that bitcoin is setting a new trend. Of course, there are others who regard today’s good news as a classic bull trap.
The latter is certainly a possibility, what with inflation remaining high and the Federal Reserve continuing to signal rate hikes.
On the other hand, it’s arguable that the global economy is nearing the end of inflation rises and rate hikes. Energy and food prices have peaked in various respects, while inflation has dropped a little in some nations.
The global economy certainly isn’t out of the woods yet, but the worst could already be over. This would explain why the price of bitcoin has enjoyed a flourish today, although with the war in Ukraine still raging on, it would be unwise to be too confident right now.