As crypto markets rallied on Wednesday, Bitcoin (BTC) recovered from the recent sell-off caused by the escalating conflict in the Middle East, aiming for a rise to high levels. While some market observers see this as a sign of strength and a potential bottom, others warn that the rally could be short-lived.
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Bitcoin shows strength despite growing geopolitical fears
On Wednesday, Bitcoin rose 8.3% to trade above the $72,000 mark for the first time in a month. The cryptocurrency has been trading between $63,000 and $73,000 since early February, but has failed to break above $70,000 during this period.
In particular, the escalation of the US-Israeli war with Iran has introduced significant volatility into risk assets, including cryptocurrencies. This resulted in sharp declines on Saturday, with BTC falling to $63,000.
However, the price of the flagship crypto quickly stabilized around the mid-zone of its local range, followed by a partial recovery above the $68,000 area at the start of the week. Now, Bitcoin is up 15.87% from its recent lows, hitting a one-month high of $73,479 on Wednesday morning, despite rising geopolitical tensions.
In a recent Bits + Bips podcast episodeChris Perkins, Managing Partner and President of CoinFund, emphasized that BTC’s signs of strength and resilience, in addition to signs of liquidity entering the market, are “good preparation” for a potential bottom.
It is worth noting that the US Bitcoin Exchange-Traded Funds (ETFs) have shown remarkable performance over the past two days, with inflows of $683.34 million since Monday, indicating that demand for the investment products is increasing.
Alex Kuptsikevich, chief market analyst at FxPro, told Bloomberg: “This is a win for cryptocurrencies, given the impressive sell-off that financial markets and gold experienced the day before,” adding that “some traders may view crypto as a safe haven.”
Too early to hit BTC’s bottom
Despite the recovery, Kuptsikevich also warned that the situation remains “too fragile” to explain the market bottom. He explained that “Bitcoin is vulnerable due to the increased volatility of stock indices, which is forcing institutional investors to reduce their debt burden.”
Meanwhile, market observer Ted Pillows suggested that BTC’s rally could be short-lived, providing a comparison between the current performance of the flagship crypto and the price action in early 2022 when the war between Russia and Ukraine began.
As the analyst noted, Bitcoin, which had already started correcting from its 2021 all-time high, saw some initial volatility as the conflict broke out, but rose nearly 40% in the following month before dumping another 67%.
BTC targets a potential 45% correction toward the $40,000 area. Source: Ted Pillows on X
This time around, BTC is starting to show a similar performance, which could lead to a 20%-25% rally towards the $78,000-$80,000 zone, according to the market watcher. However, this recovery could be followed by a strong rejection in this important horizontal area.
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If history repeats itself, the next phase of the cryptocurrency’s downtrend could begin soon, Ted Pillows warned, potentially pushing the price 45% below the rally’s potential peak prices.
Analyst Ali Martinez observed that Bitcoin has consistently bottomed between the 1.0 and 0.8 MVRV price bands over the past decade. According to the chart, this would place BTC’s potential bottom between the $43,647-$54,559 levels.
At the time of writing, Bitcoin is trading at $73,255, up 10% on the weekly time frame.
Featured image from Unsplash.com, chart from TradingView.com