At 4:05 p.m. EST, the cryptocurrency was trading at $47,819, up about 7.5 percent on the day. It spent the majority of the day above $46,000, where it started the week before pulling back slightly in the last couple of days. Bitcoin hit a low of $30,000 a month ago, around the time China cracked down on crypto mining operations, but has since rallied.
“Bitcoin broke above key resistance around $42,000 earlier this month and is now consolidating above its 200-day moving average, which is a good sign that it is likely to go higher,” said Jonathan Krinsky of Baycrest Partners. “Typically, if it is going to be rejected at a moving average, it happens quickly, as it did in May. It needs to break through $47,000, its April low, to open the door to $50,000 to $53,000.”
Ari Wald of Oppenheimer sees range-bound behavior in bitcoin’s chart, with the 200-day moving average beginning to slope sideways, rather than a trend.
“In terms of that range, bitcoin successfully tested support in July at its January low of $31,000, and its recent rally above its June peak (now support at $40,000) indicates trading conditions are improving,” Wald said. “Looking ahead, we believe a test of $59,000 resistance,” where it peaked in May, is reasonable as long as $40,000 holds.
Despite the fact that many believe the tide is turning for bitcoin, Cornerstone’s Carter Worth has stated that he will not make any moves on it.
“I wouldn’t touch it, I wouldn’t short it, and I wouldn’t buy it. “The truth is that there is no discernible trade here,” he explained. “I call it a pair of twos because I don’t have a particularly strong hand.”
He noted that bitcoin has completed a 50 percent retracement of its peak-to-trough decline, as well as a 50 percent recovery of its previous loss.
“You’re kind of in no particular position right now,” he said. “No one is in command; the bears and bulls are at odds. You’ll be dealing with that congested area for a long time.”
Grayscale Investments’ head of research, David Grider, noted that cryptocurrency as an institutionalized asset class has seen significant capital flow into crypto funds this year, particularly over the summer. Andreessen Horowitz, for example, announced a new $2.2 billion cryptocurrency-focused fund that will invest in crypto networks and companies. Until recently, other money managers who were waiting to deploy some cash sat on the sidelines.
“As the market has begun to rally, folks with that dry powder have adopted a ‘buy the dip’ mentality,” Grider explained.
That rally lasted even after crypto’s week in Congress, when a provision pertaining to virtual currency tax reporting stalled the passage of the infrastructure bill for days as lawmakers scrutinized and debated the role of crypto entities in the ecosystem and in the bill.
Grider stated, “Crypto has kind of become a political entity and industry with enough lobbying power to have its voice and views heard in Washington.” “That is extremely encouraging for de-risking large parts of the industry.”
He also mentioned that macroeconomic factors have been accommodating. Grider pointed out that the stock market is still strong, high-yield credit is doing well, and default rates are low. So far, Bitcoin’s rally has coincided with a broader risk-on rally, owing to how much cash is sitting on the sidelines – about $5 trillion globally, according to Goldman Sachs.