Is Bitcoin above $21,000 a bear market rally or the start of something good?

Despite the rise of the cryptocurrency to a two-month high, few believe that the current momentum will turn out to be anything more than a bear market rally.

The market has yet to recover from the FTX crash, so it seems symbolic that bitcoin has now reached levels prior to this dramatic event. Yesterday the asset reached $21,484 according to the cryptocurrency screener Cryptovizorwhich determines the market price of BTC/USD based on the results of trading on the largest spot exchanges.

1 week BTC/USD chart and 21 week moving average. Source: Cryptovizor

Analytical resource Material Indicators noticed on the importance of the 21-week moving average (21MA), currently at $18,600:

Another $11 million wall is placed to protect the top of Bitcoin in 2017. Maintaining this level is symbolic and increases the likelihood of a continuation of the rally, but in my opinion, the 21-week MA is crucial.

Eight trading firm founder and CEO Michael van de Poppe also shared my thoughts on the current state of affairs:

Overall market cap and altcoin cap are at the 200-day exponential moving average, while bitcoin has broken through this level on low volume. Most likely, the market confirmed the bottom, but I doubt that the growth will continue right now.

1-day chart of the total cryptocurrency market capitalization. Analysis by Michael van de Poppe

The rally continues to support an important institutional investment vehicle, the Grayscale Bitcoin Trust (GBTC). This fund’s discount on the purchase of spot bitcoins (the so-called “premium”) has decreased over the last data to 36.26%, a significant decrease from the high of 48.9% on December 13, 2022.

Almost simultaneously with the end of the week, the difficulty of mining on the Bitcoin network increased, with the increase exceeding 10% – this is the most significant positive change since October 2022. As you know, the complexity of mining is an important predictor of the cryptocurrency exchange rate.

All these rosy events are taking place against the backdrop of a lively expectation of a meeting of the US Federal Reserve System, or rather the Federal Open Market Committee (FOMC), which will be held on February 1 and will make another decision to raise the key interest rate. According to the tool FedWatch CME Group, the vast majority of experts are confident that the increase will correspond to 0.25%. This will be the lowest since the beginning of 2022, a clear bullish signal for risky assets that require free liquidity.

The rally in the cryptocurrency market began without a powerful news item, like Tesla’s investment in bitcoin. However, it looks like it will continue unless it is interrupted by a devastating negative news signal.

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