Bitcoin recently rose above its 50-day moving average.
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Bitcoin was overdue for a snapback, and it now appears to be in full swing.
The cryptocurrency has rebounded sharply, reaching $39,000 Monday, up 13.5% in 24 hours. Other cryptocurrencies were also rallying, with Ethereum up 10% to $2,359 and Dogecoin ahead 11.4% to $0.2195.
Bitcoin was due for a breakout on technical factors, analysts say, after it hit lows around $29,000. It has risen steadily for days, partly because influential proponents like Tesla (ticker: TSLA) CEO Elon Musk and Square (SQ) CEO Jack Dorsey talked it up last week, along with Cathie Wood, head of ARK Invest.
The big move Monday may also have been triggered by reports that Amazon.com (AMZN) is about to jump into crypto. Amazon posted a job for a digital-currency expert recently, saying in the description that the person will “own the vision and strategy for Amazon’s Digital Currency and Blockchain strategy.” Amazon may also launch its own “stablecoin,” or digital token pegged to a hard currency like the dollar.
“Notwithstanding our interest in the space, the speculation that has ensued around our specific plans for cryptocurrencies is not true,” the company said in a statement to Barron’s. “We remain focused on exploring what this could look like for customers shopping on Amazon.”
Despite continuing negative pressures, including heightened regulation in the U.S. and abroad, and growing criticism of Bitcoin’s carbon footprint, the currency’s latest move is a good sign, according to some technical analysts.
Bitcoin has now cleared its 50-day moving average and is up for the sixth consecutive day, reflecting positive short-term momentum. The price breakout puts the next resistance level at $42,000 to $43,000, said Katie Stockton, founder and managing partner at Fairlead Strategies, a crypto technical research firm.
“I don’t think it will be difficult for Bitcoin to surmount $42,000 since it’s not a major level,” she said. “If that level is broken, the next resistance level is $51,000.”
Bitcoin was primed to jump after briefly dipping below support levels around $30,000, she added. Gamesmanship around that level kept the price in a tight range as bearish and bullish traders squared off.
But the bulls seem to have won the day, supported partly by upbeat commentary from Musk and Dorsey, as well as technical factors.
Technical indicators point to more gains because Bitcoin was in a “coiled spring” formation that typically leads to a surge in prices, Stockton said. “Our belief is the spring will be to the upside because the long-term trend is still intact. The corrective phase was not a bearish reversal.”
Martin Gaspar, research analyst with crypto markets firm Crosstower, also sees momentum building. If Amazon announces that it will accept payments in Bitcoin, or at least facilitate payments for its merchants, it would be another sign of mainstream validation for crypto, he said.
And a recent wave of short bets may be washing out. More than $1 billion in Bitcoin was liquidated in the last 24 hours as bearish investors who had borrowed Bitcoin or derivatives sold their positions to meet margin requirements, he said. That was a classic “short squeeze,” which helped push up the price.
Traders have also had to pay steeper borrowing costs to bet against Bitcoin lately, indicating that bearish sentiment may have been peaking. And Bitcoin that was held by investors at exchanges has been flowing out, a sign that traders may be socking away the asset.
“Investors are buying and withdrawing from exchanges,” Gaspar said. “That’s a great sign. Long term holders are seeing this $30,000 to $40,000 range as attractive prices for Bitcoin.”
Bitcoin’s recent gains could easily reverse with a choice comment from a financial regulator, or a tweet from an influencer like Musk, who has toyed with it repeatedly. Traders should enjoy the gains while they last.
Corrections & Amplifications: Martin Gaspar is a research analyst with the crypto markets firm Crosstower. An earlier version of this article misspelled his name.
Write to Daren Fonda at daren.fonda@barrons.com
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