TThe price of bitcoin (BTC) has seen a healthy increase this month, rising nearly forty percent since the beginning of the month. But this raises open questions about the sustainability of this rally and whether the price of bitcoin will continue to advance from now on.
The price of Bitcoin has yet to recover from its sharp decline after hitting an all-time high of $68,904 in November 2021. Various factors led to the collapse of cryptocurrency values, including the ultra-hawkish monetary policy of the Federal Reserve. and major failures of cryptocurrency fraud schemes like Celsius. Despite this, the BTC price has seen a marked rise this month, rising sharply from last month’s low of $16,263 to this month’s high of $23,324.
Why Has There Been Such a Big Jump in Price?
Before I begin to discuss the sustainability of the current rally, it is important that I first discuss the fundamentals that are driving the current rally. The aggressive monetary policy of the Fed was the main factor in the sharp fall in the price of bitcoin. The Federal Reserve has since changed its stance on monetary policy, from very hawkish to less aggressive. For example, the Federal Reserve is almost certain to raise interest rates by just 25 basis points next month. This suggests that the Fed is changing its view even though inflation has peaked.
A risky rally is another factor that helps keep bitcoin’s price relatively stable. The price of Bitcoin has formed a significant positive correlation with the S&P 500 index, which means that as the index rises, so does the price of BTC. This suggests that the value of Bitcoin will continue to rise in the future as the risk rally continues.
Furthermore, there is a widespread perception among traders and investors that Bitcoin has prevailed despite catastrophic events such as the FTX collapse and the resulting domino effect. Hodlers began to think that the crypto winter is over and that we will come out of this difficult situation unscathed.
Will the price of Bitcoin continue to rise?
There are two critical aspects of this situation that require close attention. First, there is the flow of money invested for speculative purposes. Everyone knows that cryptocurrencies take a serious hit in prices, and if Bitcoin starts to rise in price, then there is a strong possibility that other cryptocurrencies will start to rally as well. It is likely that if the price of bitcoin continues to rise, it will lead to more FOMO, which means more speculative money will flow into the crypto industry. This has the potential to push the price of BTC higher.
Second, the dollar could weaken if the Fed begins to slow down rate hikes as expected. This has the potential to have two distinct effects on the price of bitcoin. One is the possibility that the risk-on rally could gain additional momentum, which would be beneficial for bitcoin. Another is that a decrease in the value of the dollar index can cause the price of bitcoin to increase as well.
From a technical point of view, there is no doubt that the price of BTC is overbought, as indicated by the RSI on the daily time frame. Any reading near or above 70 indicates that a pullback is possible, while any reading near or below 30 indicates that the asset is oversold.
According to technical analysts, the $30,000 level is the most significant resistance point for the price of bitcoin. If the price does not rise above this resistance level, then a bull rally is in danger. However, if BTC breaks through this level and maintains its position above this price point, the likelihood that BTC price action will attempt to retest the all-time high once again will increase significantly.
To summarize, Bitcoin price has started to gain more attention lately, but we are not out of the woods yet and won’t be until the price breaks the $30,000 resistance level and then resumes its advance from that point.
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.