Bitcoin Rises. The Case for a Bigger Spike Ahead

Bitcoin and other cryptocurrencies bounced back on Tuesday after paring gains following the latest leg of a rally that has seen digital assets soar higher in 2023. Traders should prepare for more weakness before a possible sharp spike.

The price of Bitcoin has risen 2.5% over the past 24 hours to $30,175. The largest digital asset crossed the critical $30,000 mark last week—psychologically important because it was where prices stood in June 2022, before the selloff in cryptos accelerated into a brutal bear market. Bitcoin, up some 80% this year, has struggled to consolidate above $30,000, let alone its recent peak near $31,000, and even slid below $29,500 at one point on Tuesday.

“Support for Bitcoin is defined by former resistance, near $25,200. This is a natural place for a pullback to revisit…into weakness, we would look to position for a test of long-term resistance around $35,900,” said Katie Stockton, managing partner at technical research group Fairlead Strategies.

Cryptos are likely to remain sensitive to macroeconomic forces in addition to trends in the stock market and swings in the Dow Jones Industrial Average and S&P 500. Digital assets have become more closely correlated with stocks over the past year amid a dramatic rise in interest rates from the Federal Reserve in response to decades-high inflation. Higher rates dampen investor risk sentiment, slamming both asset classes.