Market Wrap: Bitcoin and Ether Rise on Bullish Sentiment
Bitcoin bounced back toward $39,000 on Wednesday as buyers responded to short-term oversold conditions. The cryptocurrency is up about 4% over the past 24 hours, compared with a 9% rise in ether during the same period.
“If BTC holds above $40K for a week, the probability of a breakout would increase,” Pankaj Balani, CEO of Delta Exchange, wrote in an email to CoinDesk. “We believe, on a conclusive breakout of $40K level, BTC could challenge the $48K level. On the downside, traders will keenly monitor the $36K level.”
A bitcoin breakout could encourage ether buying, as well. If support holds, ether could rally further and test the $3,000 mark, according to Balani.
“ETH can outperform BTC in the medium- to long-term, but for the next few quarters, ETH should continue to exhibit strong correlation with BTC,” Balani wrote.
Some analysts, however, expect the recent bitcoin bounce to fade.
“Today’s near-term recovery snapping a four-day losing streak can be interpreted as just a rebound with resistance around $42K to $45K,” DailyFX analyst Michael Boutros wrote.
Additionally, a rebound in the U.S. dollar could limit bitcoin’s advance in the near-term, according to Boutros.
Roughly 33% of the total bitcoin supply was moved on the blockchain over the past six months, according to data from Glassnode. The chart below shows the percent of active bitcoin supply, which could be a potential indicator of holders’ mentality.
Bitcoin active supply is the number of coins transacted at least once over a given period of time. The supply metric declined from a recent peak in April, which coincided with a top in bitcoin’s price of around $63,000. Lower active supply suggests investors are holding their coins, which further reduces the total supply available to be sold.
Bitcoin’s 90-day correlation with gold turned negative for the first time since November 2017. The cryptocurrency is up about 34% year to date, compared with a 4% loss in gold during the same period. The negative correlation underscores the potential diversification benefits of holding bitcoin in a multi-asset portfolio, albeit with greater volatility.
Stocks have also decoupled from bitcoin over the past year. The S&P 500 is less correlated with bitcoin since the March 2020 pandemic shock caused a sell-off across “risk” assets, including cryptocurrencies.
The exchange reserves of many altcoins such as COMP, UMA, SNX and MKR have been increasing since June, noted @kryptonitetrading on CryptoQuant. However, the exchange reserves of AAVE and UNI have been declining, which may indicate that “healthy accumulation has been occurring during this bearish phase in the market,” according to @kryptonitetrading. As the tokens move off exchanges into wallets, it shows investor preference to hold rather than sell.
Most digital assets on CoinDesk 20 ended up higher on Wednesday. In fact everything was in the green except for dollar-linked stablecoins.
Notable winners of 21:00 UTC (4:00 p.m. ET):