Cryptocurrencies staged a rally on Monday that erased bitcoin’s 2022 losses and left it near the $48,000 mark after a surge of some 15% since last week.
A 24-hour gain of more than 6% in bitcoin, the leading digital asset, bitcoin pushed the price to above $47,500, well clear of the $46,200 notched on Dec. 31. The surge reverses a slump in which bitcoin had lost almost a quarter of its value with a slide to near $35,000.
“Bitcoin’s on-chain metrics, which have shown long term holders accumulating over the past few months, are finally proving to be accurate,” said Marcus Sotiriou, an analyst at the digital-asset broker GlobalBlock (ticker: BLOK.Canada). “With all macro headwinds being priced in for the short term, we are seeing some long-awaited relief,”
Smaller peer
ether
was just as buoyant. The price of the token underpinning the Ethereum blockchain network increased 6% to almost $3,400, leaving it at the highest levels since early January.
Bitcoin and ether remain well off their respective record highs of $68,990 and $4,865, reached in early November.
“Altcoins,” or smaller cryptocurrencies, experienced similar price action.
Solana
jumped 8%, with
cardano
7% higher and
litecoin
increasing 4%. The “meme” cryptos
dogecoin
and
shiba inu
—called that because they are mostly based on internet jokes rather than significant blockchain projects—rose 4% and 13%, respectively.
Why have bitcoin and other cryptocurrencies rallied so much? And can it continue?
Technical Factors Supporting Prices
The rally among digital assets picked up momentum late last week, when bitcoin approached the key $45,000 technical level on Friday after trading below $43,000 for much of the previous few days. Prices finally jumped above $45,000 late Sunday.
Analysts have noted that the price of bitcoin has encountered strong resistance at $45,000 for the past three months. The fact that prices have surpassed that level and remained above it signals that supply and demand dynamics have shifted, and that buyers are more comfortable with higher prices.
“From a technical perspective, bitcoin has broken out of an ascending triangle, which signals an upward trend, and likely will continue to rally in the short term,” said Yuya Hasegawa, an analyst at Japanese crypto exchange Bitbank.
Barron’s reported on Friday that Bitcoin prices were on the verge of a major breakout, partly because significant short positions—bets that the price would fall—had built up. As prices rose over the weekend, short sellers had to buy in order to limit their losses..
“Bitcoin’s futures market has been accumulating short positions when the price was fluctuating below $40,000 and right before the Sunday breakout, which resulted in about $71 million liquidation on Sunday,” said Hasegawa.
There are other signals that buyers are out in force. The Crypto Fear and Greed Index, which measures sentiment between extreme selling and extreme buying, is sitting at 60 out of 100. The last time it touched that level, bitcoin prices were above $60,000.
Institutional Adoption of Digital Assets
The rally in digital assets followed a week of notable moves into the space by major players on Wall Street and institutional investors. This builds the case for bitcoin and other cryptos as legitimate investments and paves the way for large-scale buying.
The investment bank
Goldman Sachs
revealed its first over-the-counter bitcoin options trade on March 21. And its smaller peer
Cowen
unveiled a new digital- asset arm midweek that offers clients direct access to at least 10 tokens, including bitcoin, ether, and solana.
Bitcoin also got a shoutout in the annual investor letter from Larry Fink, the chair and CEO of
BlackRock
,
the world’s largest asset manager. Fink said last Thursday that the Russia-Ukraine war could accelerate the use of digital currencies.
“Cryptos will change how the world operates and it seems with BlackRock evaluating the opportunity, many investors will try to get ahead of the next rush into cryptos,” Edward Moya, an analyst at broker Oanda, said late on Friday.
As Barron’s has reported, cryptocurrencies have enjoyed newfound attention since Russia’s invasion of Ukraine. Anonymous assets have come back into focus as Ukrainianans and Russians alike seek to navigate the economic turmoil triggered by the war and international sanctions against Russia.
A Clearing Regulatory Framework
Bitcoin prices have also benefited from moves on the regulatory front. A lack of regulation has added to doubts about the future of digital assets and slowed the flow of institutional money into the sector, but there are signs that this will soon change.
President Joe Biden unveiled an executive order this month recognizing the growth of cryptocurrencies and detailing a national policy to address digital assets. The White House has also called for the exploration of a digital dollar, a digital currency backed by the Federal Reserve.
In Congress, Senators Cynthia Lummis and Kirsten Gillibrand are working on bipartisan legislation to regulate cryptocurrencies.
Will Bitcoin Prices Keep Going Up?
A further increase in prices is also supported by technical factors.
“Bitcoin is facing heavy resistance, but if it is able to hold above the $46,000 level (which roughly marks the yearly open) for several days, I expect a move to $52,000, which is the next key resistance,” said Sotiriou of GlobalBlock. “It is clear that $46,000 is a key pivot for the short-term direction for the market.”
Yet investors should note that the prices for bitcoin, and most cryptocurrencies, are highly volatile. Double-digit swings either up or down aren’t out of the ordinary. Bitcoin remains around 30% below its all-time high, which was reached less than six months ago.
Write to Jack Denton at jack.denton@dowjones.com
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