Bitcoin Rebounds from Midweek Lull as Bulls Eye a Return to December Highs
Bitcoin’s price rebounded Friday, as the bulls continued to target a return to December highs – a move that would put the digital currency on track for a bigger short-term rally.
Bitcoin was last seen trading hands at $4,065.10 on Bitfinex, having gained 1.4%. On Thursday, the digital currency peaked at $4,175 before correcting lower almost immediately. At current values, bitcoin has a total market capitalization of $70.3 billion, according to CoinMarketCap.
The next major area of resistance is seen tracking just north of $4,200, which is the high from December. Bitcoin staged a large relief rally in the back half of December, gaining more than 35% over a nine-day stretch. That’s a peak-to-trough swing of $3,100-$4,200.
A return above $4,200 would put bitcoin on track to continue climbing, as the next major area of resistance is located at $5,000. This psychological inflection point doesn’t have much technical significance. Long-term, the bulls must eye a return above $5,500 and eventually $6,000 in order to reverse the downtrend.
Trading volumes are certainly indicative of a fast move higher. Volumes peaked at ten-month highs earlier in the week and remain well above the bear-market average. Over the last 24 hours, BTC trades on virtual exchanges were worth $7.4 billion. BitMEX, the popular derivatives exchange, processed 10% of the total daily turnover.
Snapping a Brutal Cycle
With the latest rally, bitcoin is well positioned to snap a six-month losing streak. That brutal stretch saw bitcoin’s market cap plunge by roughly 60%. Earlier this month, the leading digital currency officially entered the longest bear market in its ten-year history.
Despite the prolonged bear trend, bitcoin has made more progress within institutional circles in the last six months than its entire history combined. Intercontinental Exchange and Fidelity have confirmed their intent to launch new markets for bitcoin, and Nasdaq is said to be doing the same. Pension funds have also committed some $40 million to a crypto venture-capital fund headed by Morgan Creek Digital. Grayscale, the cryptocurrency asset manager, recently announced that 66% of the capital invested in its products last year came from institutional investors.
It’s also apparent that retail traders and long-term bitcoin holders are getting back into the game. The amount of bitcoin in circulation has been rising steadily since last summer. The influx of coins intensified in the fourth quarter as long-dormant bitcoin addresses became active once again. More on this story: Bitcoin Likely Headed Lower as Whales Activate Long-Dormant Accounts.
At the time it looked like many of these traders would become net sellers. Now, it seems like the tide is turning the other way. A closer look at the bullish and bearish cases was presented just a few weeks ago.
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.
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