Bitcoin’s rally this year is facing a test as the token struggles around $30,000. A pattern buried in the coin’s recent swings suggests it could vault above that level again en route to a 7% short-term gain.
(Bloomberg) — Bitcoin’s rally this year is facing a test as the token struggles around $30,000. A pattern buried in the coin’s recent swings suggests it could vault above that level again en route to a 7% short-term gain.
The pattern is a minimum daily jump of 3% followed by a next-day reversal of at least that magnitude during a generally bullish period for Bitcoin. The token flashed that signal over Tuesday and Wednesday.
Bitcoin rose about 7% on average over three, five and 10 days after the previous 17 such signals in the last five years, data analyzed by Bloomberg show. The study identified bullish periods by using the token’s relative strength index, a momentum gauge, which had to be above 50.
Bitcoin has rebounded about 74% in 2023 from last year’s crypto rout, helped by expectations of an eventual loosening in monetary policy. But bets on Federal Reserve interest-rate cuts are cooling because of persistent inflation, which is sapping the revival in Bitcoin and other digital assets.
Bitcoin dropped about 1% to $28,860 as of 10:42 a.m. on Thursday in Singapore. Second-ranked Ether shed roughly 2%, holding below $2,000. Smaller coins like Avalanche and meme token Dogecoin posted mixed performance.
The largest digital asset shed 3.9% on Wednesday, a retreat that may have been caused in part by a “build-up in leverage which could have triggered a liquidation,” wrote Noelle Acheson, author of the “Crypto Is Macro Now” newsletter.
“This suggests that the drop is unlikely to be long-lasting, as recent support as well as derivatives positioning points to a bias to accumulate,” Acheson added.
Other analysts are a little more cautious given the challenging monetary policy outlook and other obstacles such as the US’s crypto crackdown.
“The scaling back of Fed rate cut expectations into the end of the year removes a pillar of recent support for Bitcoin,” Tony Sycamore, a market analyst at IG Australia Pty, wrote in a note. “We continue to look for a test of support at $27,500 in coming sessions.”
–With assistance from Suvashree Ghosh.
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