Bitcoin rallied above $23,500 on Tuesday, breaking out of a four-week-old resistance level and raising hopes that the rout in cryptocurrency markets could be coming to an end.
The world’s most valuable digital currency has plummeted by 75% over the past nine months from a high of $69,000 in November 2021 to a low of $17,592 last month, according to data from the Luxembourg-based Bitstamp exchange.
Its downfall has mirrored broader, shallower sell-offs in global stock markets – particularly the technology sector – as investors come to terms with the worsening macroeconomic outlook and the likelihood of sustained higher interest rates.
Factor in the recent collapse of several disreputable cryptocurrency protocols and platforms – notably the algorithmic stablecoin UST and the centralized-finance lender Celsius – and it’s not hard to see why many pundits believe that bitcoin is entering a so-called ‘crypto winter’, a multi-year period of sustained price falls and value destruction.
Bitcoin has historically peaked at four-year intervals, boosting fears that November 2021 marked the end of the prevailing market cycle. The prior cycle had peaked at $19,666 in December 2017, almost exactly four years previously.
Despite overwhelmingly bearish market sentiment, however, bitcoin’s price action is beginning to show signs of a technical recovery.
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The cryptocurrency has been rangebound in an upward-sloping channel for the past four weeks, finding resistance at the upper and lower boundaries on eight occasions during this period.
It’s a pattern that broadly but by no means perfectly mirrors the month-long consolidation that bitcoin experienced between mid-May and mid-June. That phase drew to a close when price was twice rejected by the overhead long-term moving averages – specifically the 200 Exponential Moving Average (EMA) on the four-hour chart – which in turn precipitated a 44% price crash below $20,000.
This time around, however, bitcoin was able to jump above the 200EMA on Monday – the first breach of its kind in three months – before re-testing the level on Tuesday, finding support, and immediately propelling itself above the resistance channel’s upper boundary.
At the time of writing, price was sitting above the 50-day EMA ($23,420), another resistance level that loosely mirrors the four-hour 200EMA.
Any continued upward momentum from this point will pit the cryptocurrency against wave upon wave of overhead resistance – an inevitability following months of bearish price action that has tilted all of the higher-timeframe moving averages firmly downwards. The $30,000 level is also likely to be key given that it provided support both in May and during a summer 2021 pullback.
The crypto winter, in other words, could yet prove to be in full swing.
Nonetheless, Tuesday’s unexpected rally gives bitcoiners their first credible reason for optimism in several months.
It also brings price back above the widely-monitored 200-week Simple Moving Average (SMA) – a pivotal level that bitcoin has underneath since early June. The 200-week SMA has consistently marked the low for bitcoin’s price action since reliable chart-data was first collected in 2011.