Bitcoin Had a Big 15% Bounce to $4,300 But Traders Aren’t Convinced of Bull Run

Over the past 24 hours, the price of Bitcoin (BTC) surged from $3,771 to $4,355, by more than 15.4 percent, against the U.S. dollar.

The volume of the dominant cryptocurrency spiked from around $5 billion to $7.2 billion, as large buy orders were filled by major fiat-to-cryptocurrency exchanges like Coinbase and Bitstamp.

Bitcoin recorded the biggest single-day price surge since April 12, when the price of the asset skyrocketed from $6,758 to $8,069, by 19.4 percent.

The unexpected recovery of Bitcoin understandably led the cryptocurrency community and investors in the market to demonstrate renewed optimism towards the short-term price trend of the asset class.

However, after meticulously evaluating the price trend of Bitcoin, technical analysts have begun to offer a cautious stance on the momentum of major cryptocurrencies.

Weak Momentum

The 15.4 percent rise in the price of BTC, which is suspected to have been caused by the upcoming expiration of Bitcoin futures contracts in the U.S. market, was a strong move for BTC relative to its performance throughout the past two weeks.

A cryptocurrency trader and technical analyst recognized by the alias “The Crypto Dog” stated that while he was initially optimistic towards the corrective rally of BTC, the trader emphasized that the response of the buyers in the market did not satisfy or match the large movement of the cryptocurrency.

“Very weak. I originally had a bullish mindset watching this PA but the response from bulls has been disappointing. I still think we’ll see a bounce from 4k, but it may not continue much further. Let’s see what happens,” the trader said.

Alex Kruger, an economist and a cryptocurrency analyst, added that while a short-term bottom was established following the sudden movement of BTC, it is too early to call for the establishment of a strong bottom that could allow the asset to initiate a mid-term recovery.

He explained:

“I do not think ‘the’ bottom is in. Just ‘a’ bottom. Not changing my short term outlook. Double bottom on extreme volume after bitcoin reaching most oversold levels in history. Look at RSI. And the dots, which represent my main oversold signal (proprietary), only triggered once before, ever, marking the 2015 bottom (did dipped once after on a one day flash crash).”

In essence, if the rise in the price of major cryptocurrencies was triggered by the imminent expiration of U.S. futures contracts, many technical analysts believe that buyers or bulls in the market have failed to take advantage of the momentum and revive the momentum of large market cap digital assets.

Already, as seen in the 4-hour price chart of BTC-to-USD below, the cryptocurrency has started to engage in a downward movement.

Keep Track of the Futures Market

This week, on CNBC’s Fast Money, Morgan Creek Capital Management CEO and chief investment officer Mark Yusko said that the impact of the U.S. futures market on the price of Bitcoin has been downplayed and explained that it has had a significant impact on both the short and long-term price trend of the asset.

You see on those expiration right before the futures expire, lots of pressure on those down days,” Yusko noted.

If cash-settled futures contracts already pose a large impact on the price of BTC, the scheduled launch of the Bakkt futures market in January, which offers physical delivery of Bitcoin, could have a bigger impact on the price of Bitcoin.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Joseph Young is a finance and tech journalist based in Hong Kong. He has worked with leading media and news agencies in the technology and finance industries, offering exclusive content, interviews, insights and analysis of cryptocurrencies, innovative and futuristic technologies.