Bitcoin prices are skyrocketing. 3 signs that the rally is real and that 25% gains are ahead.

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Crypto prices are well off their recent lows but remain down this year.

Ozan Kose/AFP via Getty Images

Bitcoin
prices soared on Wednesday as investors retreated into digital assets amid returning risk sentiment in broader markets.

Analysts are watching closely for signs that this rally has momentum and where it could take prices after a recent rout.

Bitcoin price jumped 6% in the past 24 hours to $23,700, outperforming most other tokens and reaching the highest levels since the biggest crypto fell to $18,000 from $30,000 during a massive sale in mid-June.

“The short-term outlook for Bitcoin is bullish and could hit around $29,000 this week,” Bitbank analyst Yuya Hasegawa wrote in a note.

Ether,
the second-largest token, which recently significantly outperformed its larger counterpart, gained 3% to $1,600. Smaller cryptos, or altcoins, were more mixed, with


Solana

1% less than


gimbal

jumped 7%. Memecoins – originally conceived as Internet jokes – have been among the most successful as


Dogecoin

advanced by 9% and


shiba inus

jumped 8%.

Now, three weeks from the end of its worst quarter since 2011 – a year in which Bitcoin crossed the $1 threshold for the first time – analysts are wondering if the cryptos have formed a bottom after a period of highs. price reductions. The market capitalization of digital assets has crashed to $1 trillion from $3 trillion in November 2021, with some of the most severe declines occurring in the past 12 weeks.

“Bitcoin prices are now trading below the price realized for over a month, with multiple signals that a deep and complete capitulation has occurred,” analysts at crypto intelligence firm Glassnode wrote in a rating. “Many signals indicate that a true bottom formation may be underway.”

Realized price refers to Bitcoin’s average cost basis – the book value of Bitcoins purchased divided by the number of tokens in circulation. At depressed price levels, this figure can reveal if most holders are underwater.

Hasegawa’s Bullish Bitcoin Price Target Implies Further Gains in the 25% Range Could Be Happened in the Coming Days, But Others Are Less Convinced This Rally Has Legs and Could Carry the Cryptos Higher .

“The rally is strong, but with near-term overbought conditions having already returned, we think it’s premature to call it the start of a lasting reversal,” wrote Katie Stockton, managing partner of the technical research group. Fairlead Strategies, in a footnote. .

From a technical standpoint, Stockton sees three stages as evidence that a sustained rally is in play.

Bitcoin needs to break above the $25,000 resistance level and see moving average convergence divergence (MACD) — which is a technical indicator — above zero each day in addition to a positive weekly signal, Stockton said. Additionally, the weekly Stochastic, which is a momentum indicator, must be above 20% in an oversold rally.

“If these positive technical developments occur, secondary resistance near $28,800 would be targeted for the relief rally, at a minimum,” Stockton said. “We would always view the rally in the context of longer-term negative momentum and would not advocate rebuilding long-term positions until monthly indicators improve.”

Next week could hold another key catalyst for cryptos: a Federal Reserve decision on Wednesday on interest rates. While crypto declines were partly due to cracks in the digital asset market, including the collapse of the stablecoin

Earth

and the failure of high-flying hedge fund Three Arrows Capital – a correlation to equities did not help.

Having shown strong correlation with other risk-sensitive assets, such as stocks, Bitcoin and other tokens followed the

S&P500

and

Nasdaq Compound

in bearish territory this year as investors worry about macroeconomic pressures. Faced with the highest inflation in four decades, the Fed has already taken aggressive steps to raise interest rates in a bid to rein in scorching prices, but that risks triggering a recession.

“Bitcoin unexpectedly recovered its 200-week moving average and appears to be laying the groundwork for a trend reversal, but the market needs a bit more insurance to slow the pace of Fed rate hikes” , said Hasegawa of Bitbank.

Write to Jack Denton at jack.denton@dowjones.com

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