Bitcoin has been on a major bullish rally over the past two days. On the week, Bitcoin is now up by around 7%. On the other hand, altcoins are also gaining, and the broader cryptocurrency market cap is now back above $1 trillion.
Crypto winter thaws earlier than expected
During the past 24 hours, Bitcoin managed to rally to $20,954. The rally lowered Bitcoin’s Year-to-Date gains. However, the coin is still down by around 70% from its all-time high of over $69,000. Ether and the majority of altcoins are also trading in the green zone.
Cryptocurrency traders have embraced this price movement after weeks of consolidation as prices moved within the same range. The recent rally saw Bitcoin breaking past $20K for the first time since October 7.
While speaking to Bloomberg, Noelle Acheson, the author of the “Crypto is Macro now” newsletter, said that the bullish momentum points to a shift in the sentiment across the crypto space. However, she noted that it remained to be seen whether the current momentum was enough to support the bulls.
Acheson also addressed the high open interest, saying that a rise in activity could be seen soon as traders returned to the market. She added that Bitcoin had the highest number of short liquidations since July last year, indicating that some of Bitcoin’s gains were caused by traders covering their short positions.
After the crypto market rallied on Tuesday, the aggregate short liquidations on exchanges rose to $700 million, marking the highest level for Ether and Bitcoin since mid-last year.
Steven McClurg, the co-founder and chief investment officer at Valkyrie Investment, opined that the current momentum appeared to be a short squeeze because of the high amount of liquidations across different platforms. Nevertheless, there were positive signs that the market could stabilize, and a modest rally could be seen in the coming month.
The lack of a downtrend is also being seen as a positive thing. For most of October, Bitcoin consolidated and traded within the $19K range. However, the trend during this quarter is different from the one seen in the last quarter of 2021, when most cryptos were creating new all-time highs.
Uncertainty over Bitcoin’s rally
However, there is skepticism over whether the recent rally will be sustained. The cryptocurrency space has reported notable losses this year amid the actions taken by the Federal Reserve and other central banks to increase interest rates to tame the growing inflation levels. This has reduced interest in risky assets such as cryptocurrencies.
Some also believe that the bottom is in. the narrow trading range seen in Bitcoin, and most of the large cap cryptos could be attributed to seller exhaustion. While volatility has dropped in large cryptocurrencies, some low cap cryptos are still witnessing a notable spike in volatility as short-term traders attempt to book profits.
For Bitcoin to make a major rally, it must attract institutional investors and an influx of bulls. However, for this to happen, more action needed to be seen. At the time of writing, Bitcoin was already showing signs of retracing.
One of the top gainers during the past 24 hours is Dogecoin. The Shiba Inu-themed meme coin has gained by double digits amid news that Elon Musk will finalize the Twitter purchase deal this week. Musk is expected to integrate DOGE payments into the social media platform.
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