Early thawing? Bitcoin mounts surprise rally as fears of crypto winter disappear

Bitcoin rose above $ 23,500 on Tuesday, breaking out of a four-week-old resistance level and raising hopes that the roots of the cryptocurrency markets could come to an end.

The world’s most valuable digital currency has fallen by 75% over the last nine months from a high of $ 69,000 in November 2021 to a low of $ 17,592 last month, according to data from the Luxembourg-based Bitstamp stock exchange.

Its downfall has mirrored broader, shallower sales in global stock markets – particularly the technology sector – as investors come to terms with the deteriorating macroeconomic outlook and the likelihood of sustained higher interest rates.

Factor in the recent collapse of several obscene cryptocurrency protocols and platforms – especially the algorithmic stackcoin UST and the centralized financial lender Celsius – and it’s not hard to see why many analysts believe that bitcoin is entering a so-called “cryptocurrency winter”, a multi-year period of sustained price falls and value destruction.

Bitcoin has historically peaked at four-year intervals, raising fears that November 2021 marked the end of the current market cycle. The previous cycle peaked at $ 19,666 in December 2017, almost exactly four years earlier.

Despite overwhelming bearish market sentiment, however, bitcoin’s price action is beginning to show signs of a technical improvement.

The cryptocurrency has been distance-bound in an upward-sloping channel for the past four weeks, and has found resistance at upper and lower limits on eight occasions during this period.

It is a pattern that is broad, but in no way perfectly reflects the month-long consolidation that bitcoin experienced between mid-May and mid-June. This phase came to an end when the price was twice rejected by the overarching long-term moving averages – specifically the 200 exponential moving averages (EMA) on the four-hour chart – which in turn triggered a price slump of 44% below $ 20,000.

This time, however, bitcoin was able to jump over 200EMA on Monday – the first break of its kind in three months – before testing the level again on Tuesday, finding support and immediately drifting above the upper limit of the resistance channel.

At the time of writing, the price was above the 50-day EMA ($ 23,420), another resistance level that loosely reflects the 4-hour 200EMA.

Any continued upward momentum from this point will put the cryptocurrency up against wave after wave of overhead resistance – an inevitability after months of bearish price action that has tipped all the moving averages with a higher time frame down. The $ 30,000 level is also likely to be the key given that it provided support both in May and during a withdrawal in the summer of 2021.

In other words, the crypto winter may still prove to be in full swing.

Nevertheless, Tuesday’s unexpected rally gives bitcoiners their first credible reason for optimism in months.

It also brings the price back above the widely monitored 200-week simple moving average (SMA) – a key level that bitcoin has been at since the beginning of June. The 200-week SMA has consistently marked the lowest for bitcoin’s price action since reliable chart data was first collected in 2011.