Bitcoin exceeds $21,000. There is a path to $25,000, but should traders pursue it?

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Bitcoin has reached levels not seen in months. Rutmer Visser/Dreamstime

Bitcoin and other cryptocurrencies continued to rally on Tuesday, pushing back to levels not seen since the collapse of crypto exchange FTX and hitting the highest prices in months.

But analysts warned that the rally had little fundamental support, making the prospect of continuing it risky for traders.

The price of Bitcoin has risen over 1% in the past 24 hours to $21,150. The largest digital asset has moved higher over the past week, breaking out of the $16,500-$17,000 trading range that dominated last month and breaking above the key $20,000 level over the weekend. Bitcoin is now trading at the highest level since early November 2022, before the FTX bankruptcy shook the markets.

Bitcoin climbs higher after the weekend and recovers $21,000, recovering the loss caused by the FTX shock to test the November high at $21,500, said Bitbank analyst Yuya Hasegawa. Although its momentum has slowed somewhat from last week, possibly due to the holidays, it could break off the November high if Wednesday’s US PPI matches market expectations.

Indeed, despite the recent rally on seemingly few fundamentals, Bitcoin and its peers are likely to take considerable inspiration from the stock market and follow the Dow Jones Industrial Average and the S&P 500. Cryptos and stocks have become closely linked in the difficult macroeconomic environment of high and rising inflation. interest rates and recession risks over the past year, with PPI inflation data emerging later in the week as a key catalyst.

The minor breakout is positive, but short-term overbought conditions have returned, so we think a short-term neutral bias is prudent, said Katie Stockton, managing partner at technical research group Fairlead Strategies. If resistance near $21,500 is cleared, it would mark a more significant change, suggesting the downtrend has lost its grip while placing next resistance at the August high around $25,200.

However, Stockton noted that a key technical indicator is poised to issue overbought sell signals later this week, which we see as reason not to continue the rally.

Beyond Bitcoin, Ether is the second largest cryptorose 1% at over $1,550. Smaller cryptos or altcoins were a bit more muted, with Cardano flat and Polygon up 1%. Memecoins were weaker, with Dogecoin and Shiba Inu down less than 1%.

Write to Jack Denton at [email protected]

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