Bitcoin is on a bullish streak. A deep drop could occur when the sentiment changes.

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Bitcoin hit its highest level since before the FTX bankruptcy shook the crypto markets. Ozan Kose/AFP via Getty Images

Bitcoin and other cryptocurrencies paused on Tuesday, holding onto most of the gains from a rally that took cryptos to their highest level in months. But analysts warn that the recent upside move is fragile and a change in sentiment could cause a quick and painful retracement.

Bitcoin price rose less than 1% in the past 24 hours to $22,800. The largest digital asset traded near $23,300 in recent highs, marking the highest point since August and representing a return to price levels not seen since the collapse of crypto exchange FTX that has shook the market in November.

Rallying more than 30% in two weeks, Bitcoin led risk-sensitive assets higher amid improving sentiment regarding the future of inflation and interest rates, the Dow Jones Industrial Average and the S&P 500 also recording gains.

But crypto traders should be careful.

The short-term breakout preserved positive momentum, but we won’t continue the rally, said Katie Stockton, managing partner at technical research group Fairlead Strategies. Bitcoin’s initial support can now be measured by its 200-day moving average near $19,600. However, a retracement is likely to go much further once risk-free positioning returns to global markets.

Beyond Bitcoin, Ether, the second-largest crypto slid less than 1% to $1,620. Smaller cryptos or altcoins were in better shape, with Cardano 1% in the green and Polygon 2% higher. Memecoins were more mixed, with Dogecoin just above flat and Shiba Inu 1% in the red.

Write to Jack Denton at [email protected]

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