Bitcoin’s hold above $20,000 gives bulls hope for sustained rally

Bitcoin’s four-day streak above $20,000 has bolstered crypto traders as they bet on the token’s resurgence after a brutal year.

On Tuesday, the largest cryptocurrency by market cap advanced above $20,000, and as of Friday morning in New York, it had yet to fall below that threshold.

The breakout marked the end of a nearly three-week decline that saw bitcoin trade below the key level for the longest stretch since late 2020.

Other cryptocurrencies staged their own comebacks. In recent days, ether has traded at or just above $1,500 after spending much of the month near $1,300.

Meanwhile, dogecoin has risen around 40% since the end of Sunday. Elon Musk, an ardent altcoin fan, completed his $44 billion acquisition of Twitter Inc. this week.

Still, that’s not what the “Uptober” crypto traders wanted.

Crypto fans had seen that bitcoin has made huge gains in Octobers past.

This time last year, for example, the token was up 40% during the month.

But the advance of digital assets this week was encouraging for crypto bulls who were hoping that the worst of the year’s sell-off is behind them.

“Crypto has seen solid fundamental progress over the past few months,” wrote Matt Hougan, chief investment officer at Bitwise Asset Managementand points to the successful upgrade of the Ethereum network as well as progress on the regulatory front.

“But these fundamental factors have not been reflected in prices.”

Hougan said a couple of events boosted crypto prices this week.

First, data from Tuesday showed that US consumer confidence fell to a three-month low.

According to Hougan, the market participants took the data to mean that the Federal Reserve’s aggressive rate hikes are having the desired effect.

Bitcoin has already fallen 70% from its highs, a bigger loss than seen with many other assets, says Steven McClurg, co-founder and chief investment officer at digital asset fund manager Valkyrie Investments.

“The flat markets just before re-exceeding $20,000 are likely due to the support of corporate and institutional owners who bought in heavily around these prices showing that there is support for the asset, rather than a capitulation that would have caused an intense downturn,” he said.

“There’s a glimmer of hope here that things might start to get better sooner rather than later.”

While some bitcoin supporters are now ready to proclaim the end of this latest “crypto winter” bear market, at least one analyst is taking a more reserved tone.

“We caution against countertrend exposure because bear market rallies are often fast and furious, making them difficult to time,” said Katie Stockton. co-founder of Fairlead strategies.

A number of measures show that interest in digital assets has decreased during this year’s downturn.

Retail investors in particular have been disappointed with the asset class, and have not been involved in the market in the same way they were during the first two pandemic years.

Google searches for the word “crypto” have fallen to their lowest levels in the past year.

It’s not just retail: Institutional digital asset products this month saw their lowest ever trading volume in data going back to June 2020, with average daily volume falling 34% to $61 million, according to CryptoCompare.

Still, these are the exact types of trends you can see toward the end of a prolonged downtrend, says Alec Young, investment strategist at MAPsignals.

“People giving up is what happens late in a bear market — the Google searches, etc., that’s what you want to see, that capitulation, throwing in the towel,” Young said in an interview.

“It’s bullish for bitcoin that people are giving up – that’s what you see at the turn.”