Short-term Bounce in BTC

Bitcoin Price Action

Currently, as of 3:00 PM ET Bitcoin is trading at around $41,440. That equates to a gain of 1.65% or $700 for the flagship cryptocurrency on the day and a $2,000 gain so far for the week.

Bitcoin and Risk Demand Correlation

This week’s rise has been pushed along by a rally in risk-on assets with the Nasdaq Composite up substantially in trading today. The Nasdaq Composite outperformed the number one crypto by market cap gaining around 300 points, or over 2%, nearly erasing the losses from the previous week. Risk-off assets experienced the opposite momentum, with gold futures down nearly 2%, erasing their gains from last week and trading down by over $30 on the day.

With the current levels of inflation driving the Federal Reserve to implement a swift round of monetary tightening towards normalized interest rates how long can this risk-off market sentiment last? What we could be witnessing is merely a pause or round of profit-taking from short-sellers before returning to the underlying risk-off demeanor.

Bitcoin Technical Analysis

Yesterday’s action in Bitcoin was still very critical, and its intra-day recovery kept the support intact at the 600-day moving average. This is the fourth time in the last three months that BTC experienced an extended low dipping well below the 600-day SMA before recovering and closing back above this area of support. In each of the four instances, BTC went on to make nice gains the following day.

If Bitcoin is to avoid revisiting the January lows at around $34,700 and rally from its current price, then it needs to hold this level. If it cannot hold this area the next level of support comes in at $37,300. Resistance may still remain at the 100-day MA if we don’t get a close above $41,250; above that is the 50-day MA at $42,175.

Bottom Line

With all the macro indicators pointing towards more pressure on riskier assets today’s move higher may just be a dead cat bounce. As such the gains in Bitcoin over the last two days cannot yet be classified as the start of a rally or a pivot from bearish to bullish. We would need to break above the 50-day MA in order to make that determination.

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