Bitcoin’s four-day streak above $20,000 has invigorated cryptotraders as they bet the token is due for a resurgence after a brutal year.
On Tuesday, the largest cryptocurrency by market value advanced above $20,000, and as of Friday morning in New York it had yet to fall below that threshold.
The breakout marked the end of a nearly three-week slump that saw bitcoin trading below the key level for the longest stretch since late 2020.
Other cryptocurrencies staged their own comebacks. For the past few days, ether has traded at or slightly above $1,500 after spending much of the month closer to $1,300.
Meanwhile, dogecoin has surged around 40% since the end of Sunday. Elon Musk, a fervent fan of the altcoin, completed his $44 billion acquisition of Twitter Inc. this week.
Still, it’s not the “Uptober” cryptotraders wanted.
Crypto fans had seen bitcoin post tremendous gains in Octobers past.
This time last year, for instance, the token advanced 40% during the month.
But digital assets’ advances this week were encouraging for crypto bulls hoping that the worst of this year’s selling is behind them.
“Crypto has been making solid fundamental progress in recent months,” wrote Matt Hougan, chief investment officer of Bitwise Asset Management, pointing to the successful upgrade of the Ethereum network as well as advances on the regulatory front.
“But those fundamentals have not been reflected in prices.”
Hougan said a couple of events elevated cryptoprices this week.
For one, Tuesday data showed U.S. consumer confidence fell to a three-month low.
According to Hougan, market participants took the data to mean that the Federal Reserve’s aggressive interest-rate hikes are having the desired effect.
Bitcoin has already dropped 70% from its highs, a greater magnitude of loss than has been seen with many other assets, says Steven McClurg, co-founder and chief investment officer at digital asset fund manager Valkyrie Investments.
“The flat markets just before surpassing $20,000 again are likely due to the support of corporate and institutional owners that largely bought in around those prices and shows there is support for the asset, rather than a capitulation that would have caused an intense drawdown,” he said.
“There is a small glimmer of hope here that things could start to improve sooner rather than later.”
While some bitcoin proponents are now ready to proclaim the end of this latest “cryptowinter” bear market, at least one analyst is taking a more reserved tone.
“We caution against countertrend exposure because bear-market rallies are often fast and furious, making them difficult to time,” said Katie Stockton, co-founder of Fairlead Strategies.
A number of measures show that interest in digital assets has waned during this year’s downturn.
Retail investors, in particular, have been disenchanted by the asset class, and haven’t been involved in the market the same way they were during the first two pandemic years.
Google searches for the word “crypto” have fallen to the lowest levels in the past year.
It’s not just retail: Institutional digital-asset products this month experienced their lowest-ever trading volume in data going back to June 2020, with average daily volume dropping 34% to $61 million, according to CryptoCompare.
Still, these are the exact types of trends one might see toward the end of a prolonged drawdown, says Alec Young, chief investment strategist at MAPsignals.
“People giving up on something is what happens late in a bear market – the Google searches, etc., that’s what you want to see, that capitulation, throwing in the towel,” Young said in an interview.
“It’s bullish for bitcoin that people are giving up – that’s what you see at the turn.”
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