While bitcoin has risen beyond $30,000 in tandem with a rise in global equities markets. However, it may be too soon to declare a trend reversal higher.
At press time, the largest cryptocurrency by market capitalisation was trading near $31,300, up 5% on the day. The recovery comes a day after the cryptocurrency’s first UTC closing below $30,000 since New Year’s Day. This definitely did catch some traders off guard.
The Fall-Off Reason
On a break below $30,000, market participants were concerned that put-option sellers would take short positions in the market. Therefore, this would exacerbate the price slide. Furthermore, in the run-up to bitcoin’s breach below $30,000, fund holdings fell, indicating a lack of dip demand from major investors. Thus causing a higher likelihood of a prolonged sell-off.
The Fall Was Shallow
Despite this, the drop below $30,000 was brief and shallow, probably due to a risk reset in traditional markets. According to the Financial Times, the US share market surged over 1% on Tuesday as investors turned their attention away from the delta coronavirus strain and toward growth, boosting banks and industrial firms.
The crypto derivatives exchange FTX’s record $900 million fundraisings at an $18 billion value may have boosted market sentiment. Despite bitcoin, the industry leader, losing more than half of its value since mid-April, a large number demonstrates long-term confidence in the crypto sector.
Scepticism Still Lies
Nonetheless, some experts are sceptical. LMAX Digital currency expert Joel Kruger said:
“Bitcoin is still chopping around. I still believe there is a chance for another big drop, but it would need a break below the June low of $28,800.”
Bitcoin is still trading below the critical 50-day moving average (MA) resistance level. Katie Stockton, founder and managing partner of Fairlead Strategies, in a weekly research note, said:
“Bitcoin has been grinding lower below its downtrending 50-day MA, which can be considered initial resistance near $35,000, with a breakout above targeting the 200-day MA near $44,000.”