The bitcoin price soared past $24,000 on Wednesday, adding more than $800 to its value as it rose 3.5% in less than 12 hours. With this latest gain, the cryptocurrency is trading at prices not seen in over a month. However, bitcoin couldn’t hold the $24,000 level, as it fell back below it just an hour later.
Meanwhile, the ether price approached $1,600 after adding more than $55 to its value in an increase of 3.6% in less than 12 hours. Crypto enthusiasts appear to be optimistic about the upcoming upgrade to the Ethereum network generally referred to as the “Merge.”
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What's Driving The Bitcoin Price?
According to CNBC, crypto investors are hoping that the Federal Reserve will be less aggressive at its next rate-setting meeting than previously expected, resulting in a relief rally for cryptocurrencies. Tighter monetary policy from the central bank has weighed heavily on all risk assets, lumping in cryptocurrencies with stocks.
Despite today's rally, bitcoin is still off by about 50% since the beginning of last year. Nexo CEO Antoni Trenchev told CNBC that this may not be the end of the bear market for crypto, but a relief rally for bitcoin has been a long time coming. The crypto lender's chief executive added that bitcoin is starting to "find its feet after a shaky month," adding that "the next week will be telling."
The Fed is expected to hike interest rates again at its next policy meeting. However, economists are predicting a 75-basis-point hike rather than the hike of 100 basis points that had previously been forecast.
Cryptocurrencies have long been touted for their previous lack of correlation with the traditional financial markets. However, as institutional adoption crew, that thesis turned out to be incorrect. When macro factors like interest rate hikes started to affect stocks and other risk assets, they also started to weigh on cryptocurrencies, which became highly correlated with stocks.
Is It Different This Time?
Bitcoin's move above $22,700 means it has surpassed its 200-week moving average, suggesting the potential for a "trend reversal," according to Bitbank crypto analyst Yuya Hasegawa. He added that the market requires a bit more "assurance for deceleration" in the pace of the Fed's rate hikes. However, he also sees bitcoin's short-term outlook as bullish, potentially leading to a high of around $29,000 before the week's end.
Pseudonymous crypto investor Trader XM tweeted a chart showing why he thinks bitcoin will move higher. The cryptocurrency hasn't retested its range low recently, although it has retested its range high four times, which suggests buyers could be taking control of the market.
On-chain data firm Whalemap tweeted another chart that highlights the lack of demand for bitcoin between $23,000 and $27,000, adding that $27,100 should be the first resistance level on the way up. Additionally, crypto analyst Dylan LeClair tweeted a chart showing that a significant number of bitcoin shorts opened between July 15 and 17, but those traders are now recording a loss. Tens of thousands worth of open short interest in bitcoin is now underwater.
Remember The Correlation With Tech Stocks
Essentially, all these posts add up to a prediction that bitcoin could be set for a trend reversal. However, it's important to note the correlation between tech stocks again, as the Nasdaq 100 and Nasdaq Composite are both up by almost 2%, driven by robust earnings reports from multiple companies.
Thus, playing bitcoin only by its own technicals might not work as well in the past, although, as always, it's anyone's guess what the cryptocurrency will do next.
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