Time to get back into Bitcoin? We think so. The senior cryptocurrency is often regarded as a benchmark for sentiment around digital assets. The current crisis affecting US and European banks has some investors dipping their toes back into crypto because it is largely detached from the activities of central banks. Plus there seems to be a gathering opinion in crypto markets that the Fed is going to have to curb future rate rises.
Over the weekend, Bitcoin rallied to new local highs of $28,300, as it made a higher high on the weekly time frame. Technically speaking, this signals the start of a new bull trend for digital asset trading and the end of the bear market. To be confident of a trend reversal, we need to see how Bitcoin reacts at the support level of $25,200. The Armchair Trader bought back in Bitcoin at $22,953 for our short term trading strategy.
Why has Bitcoin been moving recently?
The recent closures of US banking giants have acted as a catalyst for Bitcoin’s price increase, as the drawbacks of the banking system are a key proponent for decentralised assets such as Bitcoin. In fact, open interest in Bitcoin futures has hit a yearly high, showing how there is now significant speculative interest in the digital asset trading market.
CoinGlass data tells us that the nominal value of open interest has reached $12 billion - a 7% gain for the month. Despite open interest not giving us knowledge as to the direction of the positioning, it shows us that there is huge speculation in the market right now, so we could see a big move in either direction.
Bitcoin has been firmly higher as stocks and risk assets rally in the wake of news of an emergency funding deal for struggling First Republic Bank in the US. The announcement on Thursday saw risk assets soaring higher, helping drive bullish sentiment in Bitcoin. BTC is now up more than 30% off last week’s lows and while above the $25k mark. This looks to us like a distinctly bullish trend.
"Alongside the broader pickup in risk sentiment, the big driver behind the rally in Bitcoin has been the scaling back of traders’ Fed rate hike expectations in the wake of recent market turmoil," explained James Harte of TickMill Group in a note out to traders on Friday. "With banking sector liquidity concerns rife, the market is now expecting a far less hawkish decision and outlook from the Fed next week with projections now split between a smaller .25% hike and an unchanged decision."
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