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Bitcoin’s resurgence is just a rebound and fails to erase the hunger of the bears

Date: June 1, 2023 Time: 19:22:07

Bitcoin and other cryptocurrencies have taken a breather after a spectacular multi-month decline. Now, after several days, digital assets have returned to levels not seen since the collapse of the FTX crypto-asset platform caused a strong sell-off two months ago in sector prices and the shock of retail investors.

The price of Bitcoin managed to touch the level of 21,000 dollars. The largest cryptocurrency has soared over the past few sessions, going from below $17,500 less than a week ago to peaks above $21,000. This higher level rally represents a revival after two months of subdued activity following the collapse of Sam Bankman-Fried’s FTX, with Bitcoin hitting a two-year low around $15,500.

Crypto asset traders are optimistic that the worst of the bear market, which has dragged a bitcoin down from its November 2021 all-time high near $69,000, may be over. However, some of that may be outside of the control of cryptocurrencies.

“The connection between digital assets and stocks remains strong, with Bitcoin largely following the performance of the Dow and S&P 500 last year amid a difficult macroeconomic backdrop of high inflation, rising interest rates. and recession risks”, comments Atlantic Capital. “That link is expected to continue,” she adds.

At least in the short term, technical analysis of the crypto ecosystem suggests that bitcoin has some support, although the rally may not be worth chasing at this point. “Deeply overbought near-term readings defy positive momentum, so we would not chase a rally at these levels,” says Katie Stockton, managing partner at technical analysis group Fairlead Strategies.

“If Bitcoin is able to stabilize above its 200-day moving average around $20,000, the next hurdle would be $21,500, according to Stockton, adding that the benchmark crypto is now on major moving support of the prices of the last 50 sessions around 17,000 dollars.

“An increase in risk appetite has led to a rise in Bitcoin, which spent the final weeks of last year languishing between $16,000 and $17,000… It is up more than 25% since the turn of the year, topping $20,000” , describes Craig Erlam, analyst at the Oanda broker.

“It is not clear if this is a sign that it is bottoming out and experiencing a rally or just a brief rally, but clearly there are still some very bullish traders out there. It should be a few interesting weeks”, says the expert.

The great short positions

The violent move higher has caused pain for traders who were betting short or bear against Bitcoin. These are made in the futures market of said cryptoactive, which is the most liquid of all cryptocurrencies. Traders often go short on margin, or borrow money, and brokers can forcefully close your position if the market moves against you in a process known as liquidation.

Since Jan. 11, when Bitcoin was trading below $17,500, more than $355 million in short Bitcoin positions have been liquidated, according to crypto data firm Coinglass. Across the crypto landscape, $1.1 billion in shorts have been removed over the same period, as the company itself reports.

And yet, there are still more people going short Bitcoin compared to betting bullish. In the five days between January 11 and 15, when Bitcoin soared 20% higher, there were more Bitcoin bets “long” than “short,” according to Coinglass data, which supports the trend of a big bullish rally. . However, by Monday, that trend had reversed, with more than 50% of all futures positions in the digital asset being short Bitcoin.

“It could be a sign of more pain to come for the bears if Bitcoin continues to rise. Or it could be an indication that the market believes there has been enough momentum for now and that prices may cut gains slightly,” Erlam concurs.

Puck Henry
Puck Henry
Puck Henry is an editor for ePrimefeed covering all types of news.

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