BTC touched an annual high of $21,095 on Jan. 13, according to data from the BizTrust terminal.
The spike in BTC continues in 2023, as it is the first time BTC has surpassed $20,000 since the FTX crash in early November. Bitcoin is currently witnessing an uptick in bullish momentum following a strong rally across the cryptocurrency market following a positive Consumer Price Index (CPI) report. Bitcoin’s recent rally is creating higher trading volume levels and higher social engagement.
BTC started the week close to the $17,000 mark after hovering around the $16,000 area since mid-December. Bitcoin is currently trading at $20,867, up 22 percent from last week’s $16,900. Still, BTC is near the lower end of a brutal bear market compared to November 2021, when it broke $65,000 in market cap.
Is the Bitcoin Bear Market Over?
Although the market is still in a bear market compared to last week, investor sentiment is improving. According to the Fear and Greed Index, a cryptocurrency-specific indicator that uses five weighted sources to measure sentiment, investor perception of the market is at a new monthly high.
Bitcoin prices are now above the important psychological mark of $21,000, so many analysts and traders are voicing their opinions on where BTC prices are headed next. Craig Erlam, senior market analyst at forex market maker Oanda, said that “$20,000 was once considered a troubling low, but now could represent a sign of recovery.
Bitcoin trading volume remains a concern
Bitcoin prices have not yet recovered to pre-FTX bankruptcy levels, but reached above $21,095 on Jan. 13 for the first time since Nov. 8, 2022. Despite BTC’s recent strong rally, some analysts believe BTC prices need to stay above $21,000 before the current bullish trend can be sustained.
Glassnode’s analysis based on BTC price versus volume data says, “The new bullish trend from January 1 pushed bitcoin to the $186,000 to $189,000 level, but a crossover to $19,000 is needed to gain new trading access around $19,000 to $21,000. Resistance is expected around these levels as Bitcoin faces a medium-term downtrend. If the price fails to break the trend line, we expect a pullback to the $16-$17,000 area.”
BTC trading volume of less than $18,000 indicates weak activity on current on-chain and centralized exchanges (CEX). The largest volume and overall activity appears to be around the $16,000 level, suggesting a firmer bottom than the current price range. Bitcoin’s rally could be limited to $21,095 due to low volume around levels above $21,000.
Is this just a bear market rally?
As Bitcoin continues to face headwinds including a macroeconomic crunch leading to mass layoffs at exchanges, Gemini and Genesis legal issues, and the possible formation of a U.S. House Crypto Subcommittee. As well, Bitcoin’s Relative Strength Index (RSI) currently indicates that BTC is overbought. According to the RSI analysis, a sharp downtrend could develop as the price corrects.
TraderSZ says that macro markets are also at major resistance levels. The U.S. Dollar Index (DXY) is at a key support level, meaning that risky assets like Bitcoin could start to sell off if the index rallies. Bitcoin remains correlated to stocks, and the SPX Mini Futures Index is also showing signs of a pullback.
BTC may have a hard time reaching higher levels as bitcoin investors follow TraderSZ’s advice to take profits.
Historical Data Suggests Bitcoin May Have Hit a Macro Bottom
Bitcoin is currently below its 200-week moving average, and according to independent market analyst Rekt Capital, the price may have hit a macro bottom based on historical data. Historically, the “death cross” level indicates a bottom at $23,500.
Independent market analyst HornHairs cited historical data from 2015 to estimate how long it would take for bitcoin to hit new all-time highs. hornHairs said, “The bull market from 2015 to 2017 lasted 1,064 days, matching the bull market from 2018 to 2021 that lasted the same number of days. If traders matched the 2017 to 2018 and post 2021 bear markets with the current market, bitcoin would need 1,001 days to reach new all-time highs.”
Despite the current conditions and the strength of the current price breakout, Bitcoin has proven many technical analysts wrong in the past. Risk-averse traders may want to consider paying close attention to the increase in trading volume as the price rises as an indicator of whether bitcoin will eventually return to a bull market.