Investors’ nerves were put to the test during this bear market, which has been going on since September 2021. But a rebound in bitcoin (BTC) in recent weeks seems to be a game-changer. If investor confidence quickly returned after the first signs of a bull market, is this the end of the bear market?
The current analysis was prepared in collaboration with the Bitget crypto exchange platform. Present in more than 100 countries, Bitget is a cryptocurrency exchange created in 2018. With a user base of more than 8 million, the digital asset platform offers a variety of services to its customers. These include derivatives trading, spot trading, social trading and copy trading. Thanks to its innovative products, bitget seduces both amateurs and professionals.
Bitcoin (BTC) rally: Consolidation underway?
Bitcoin (BTC) started 2023 with a bang after struggling through the previous year, which was marked by a seemingly endless bear market. Since the beginning of the year, the price of bitcoin (BTC) has literally soared with an increase of more than 40%. In this bullish momentum, bitcoin (BTC) ends January with a fourth consecutive green candle (bullish Japanese candlesticks are either green or white).
The first cryptocurrency by market capitalization posted a very good performance at the end of January. Bitcoin (BTC) came close to $24,000 on the evening of the 29th of the month, before rapidly falling to just over $22,000. After a small bounce to $23,000, the king of cryptos traded at just over $22,900 on February 1. In any case, the price held above the $21,000 mark.
January is in any case the best month for crypto in more than four months. This rebound is partly supported by optimism that inflation has peaked. Analysts are talking about a short-term consolidation phase oscillating between $21,000 and $23,000.
Bitcoin (BTC) rebound and return of investor confidence
The FTX implosion last November had a big impact on bitcoin’s price as well as investor confidence. But the stability of BTC over the past few weeks has visibly given them a sense of confidence and security. Incidentally, the Fear and Greed index for bitcoin rose above 50. In other words, investors came out of fear.
It should be understood that the sentiment of the crypto market directly affects the price behavior of bitcoin (BTC) and the crypto market overall. The Fear and Greed Index determines the general sentiment of the community towards the parent cryptocurrency. The tool relies on the logic that investors get scared when the market is down with falling prices. Conversely, they become greedy with rising prices.
The metric takes into account a number of indicators, mainly price volatility, different polls and reactions on social networks. The index measures community sentiment with a score of 0-100, 0 being extreme fear, and 100 the highest level of greed. The index indicated a score of 52, a neutral stance, but out of fear anyway.
Bitcoin (BTC): End of the bear market or bull trap?
How sustainable will this price rise be for BTC, if at all? The outcome of the next few months remains uncertain despite real optimism in the cryptosphere. What is certain is that the bear market is on hold for bitcoin, the end remains to be seen. According to data from several exchanges, the spot price of BTC is lower than the futures prices. Also, there are more call options traded in the market than put options.
The data clearly indicates an uptrend. But the macroeconomic environment remains difficult, with inflation still high. Despite this rally, a further decline in BTC should not be ruled out. This, when it is known that another crypto giant, Genesis, has gone bankrupt. This could spill over to other key companies, large BTC fund holders in this case. A situation that can negatively impact the price of bitcoin.
Moreover, the trading volume in this rebound remains relatively weak. However, a sharp increase in this volume would be needed to validate this upward trend. Reasons why some market metrics still raise fears of a bull trap (a reversal of an upward rally).
Many are betting on the continuation of this upward trajectory for the price of bitcoin (BTC) in February and the next few months, which will end the bear market. But it must be recognized that everything will depend on the confluence of a few macroeconomic factors, in particular the Fed’s inflation rates. The current rally may be followed by sudden movements and increased volatility, nothing is certain yet.
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