It’s been an explosive past 24 hours for Bitcoin. After printing a strong rejection at $7,800 on Tuesday evening that made many traders wary, the cryptocurrency finally broke out to the upside just hours later.
It wasn’t an explosive move like the one that took Bitcoin from $7,000 to $7,700 late last week, but a move that was slow and controlled — something not seen too often in the ever-volatile crypto markets.
As of the time of this article’s writing, BTC is trading at $8,350 — nearly 10% higher than it was trading for just 24 hours earlier, and more than 115% higher than the $3,700 lows seen in March’s “Black Thursday” crash.
Although this move is still panning out, looking at the market data and technicals, analysts have become convinced that Bitcoin is decisively becoming a buyers’ market, which bodes as the latest block reward halving is now only two weeks away, estimates suggest.
There’s Plenty of Room for Bitcoin to Rally
He observed that with open interest, or the amount of capital locked up in the derivatives market, falling as Bitcoin has risen, there is still room for a “rush of momentum” when buyers are convinced to step in:
There can still be a big herd rush of momentum when sidelined players catch up.An initial delayed response of participants, even better in very inefficient markets. Open interest not rising on futures gives plenty of room for BTC to run if we see some big hitters start piling on there.
In terms of technical trends, a number of resistance levels that were depressing the bullish case over the past few days have just been broken past. A daily candle close above $8,300 would invalidate the resistances, leaving BTC with more room to rally to the upside.
Not Out of the Woods Just Yet
Yes, there may be this convergence of positive signs but many have made it clear that the stock market is not yet out of the woods, despite its own ~40% rally from the March lows.
This uncertainty puts Bitcoin at risk due to the cryptocurrency’s correlation with the stock market, specifically the S&P 500 index.
As reported by Blockonomi previously, a note from Goldman Sachs shared by Bloomberg indicated that strategists at the multinational bank expect there to be a bearish shift in momentum in how the S&P 500 trades.
The analysts said that with large-cap stocks, like Microsoft and Amazon, outperforming smaller-cap companies as of late, they’re worried a “large” downturn in markets will follow suit:
Sharp declines in market breadth in the past have often signaled large market drawdowns. Narrow breadth can last for extended periods, but past episodes have signaled below-average market returns and eventual momentum reversals.
Goldman explained that the trend that has begun to transpire, where the gains are being consolidated in a few key players, is very similar to what happened during the Dotcom Bubble and Crash and the Great Recession.
Fortunately, Bloomberg’s commodities desk, namely senior analyst Mike McGlone, wrote in a report earlier this month that Bitcoin is slowly maturing to an asset that is similar to the precious metal gold.
The desk cited the increased adoption in the futures market, a growing number of users, and a decrease in the positive correlation between it and the S&P 500.
Should this transition continue to gain steam, it could invalidate the sentiment Bitcoin will fall in the wake of another stock market drop.