Bitcoin’s leap in dominance comes after the cryptocurrency hit its highest levels since last June in the mid-$26,000s earlier this week, a stunning recovery from last week’s dip to new two-month lows under the $20,000 level. Last week’s dip was triggered by broader risk-off flows after a spate of crypto/tech-friendly US banks went under.
This week’s recovery was triggered by a combination of bullish factors, analysts think, including 1) a proactive response from US authorities to backstop deposits and 2) launch a new bank liquidity program (which helped USDC, a key part of the crypto market’s plumbing, recover back to its $1 peg), and 3) expectations that the risk of a banking crisis would deter the Fed from engaging in substantial further rate hikes.
The aforementioned narrative around Bitcoin being a safe haven against trouble in the traditional financial system is also touted to have helped, just as it is being touted as boosting Bitcoin versus its major crypto rivals. What the cause of the rebound, analyst price predictions have become substantially more bullish.
Technical signals look good; Bitcoin rebounded strongly from its recent retest of the 200DMA and Realized Price (both just under $20,000), a sign the bull market is robust, and the recent breakout above $25,200-400 area resistance is deemed as opening the door to a run higher towards the next resistance area in the $28,000 area.
On-chain indicators that can signal when a bear market is over continue to send good signals, as discussed in this recent article. Metrics relating to Bitcoin’s on-chain activity (like daily transactions, new address creation, daily active users, no. of addresses with a non-zero balance) generally also continue to trend in a positive direction.
Traders will continue to monitor the health of the US and global financial system, with any signs of further cracks potentially adding further fuel to Bitcoin’s rally. Next week’s Fed meeting will be another key event to watch, with this week’s US CPI and PPI (thankfully for the Fed) giving them some room to signal a slightly less aggressive tightening outlook. That could be another tailwind for Bitcoin.
