Bitcoin catches up with stock market rally, but it's not a trend reversal
By Noemi Jansana / Alejandra Zamora
Date: Wednesday 01 Jun 2022
(Sharecast News) - Bitcoin once again left new highs since before the collapse of Terra on Tuesday, above $32,000, a key resistance level for the digital asset and, more importantly, closed May on a bullish note above $31,500, according to data from CoinMarketCap. However, experts warned that this behavior means nothing other than that the digital asset par excellence and, therefore, the entire market is catching up with the rally that the stock markets have been experiencing for several weeks.
Cryptocurrencies were lagging and the long-observed coupling with stock markets was lethargic. However, digital currencies have turned the corner, leaving gains of between 5% and 10 to 15% in some cases in the last week and their total capitalization exceeds $1.3 trillion. From a technical analysis point of view, it is clear that this behavior is nothing more than a bullish rally in a bear market.
This is how independent analyst Pentoshi put it, in a social media post. "Bear market rallies can be brutal. They can go much higher than you think, but they almost always end at a declining high or the same. Don't be fooled by emotions," he warned.
While the market is watching for signs of strength, cryptocurrency analyst Michael van de Poppe stated that a break above $31,100 opens the way to test resistance at $32,800. That would put Bitcoin at price levels last seen in early May, when a falling market saw Bitcoin plummet from highs near $40,000 to lows of $26,600.
In fact, "On the upside and to think about sustainable upside, you have to break above $35,000 to try to attack $40,000," pointed out Javier Molina, analyst at eToro.
A recent report by 'Bloomberg' also indicated that Bitcoin's recovery could be just an oasis before another major fall. Therefore, this should not be confused with a sustained reversal. If Bitcoin fails to hold its key support levels, it has every chance of falling back to the $22,000 levels, noted Bloomberg Intelligence's Jamie Douglas Coutts.
"If it can hold the psychologically important $30,000 level, it could trade in range up to $40,000 resistance. Technically, a break below $29,000 would confirm an ominous double-top pattern with the next support at the May low of $25,424, and then the 200-week moving average at $22,130," he added.
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