Bitcoin Holds After a Rally. Why It May Not Last and Where Cryptos Could Fall.

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Bitcoin
and other cryptocurrencies were retaining gains Tuesday after a recent rally. Crypto traders will be hoping this marks the end of a bad stretch, but analysts are still eyeing vulnerabilities across the digital asset space.

The price of Bitcoin has traded flat over the past 24 hours at $17,250. The largest crypto traded as high as near $17,400 on Monday after surging above the $16,500 to $17,000 trading range that has dominated for much of the past month.

“Bitcoin and crypto are showing signs of strength,” said Vineeth Bhuvanagiri, managing director of Emurgo, the commercial arm of the Cardano blockchain. “That said, it’s entirely unclear how sustained this rally will be.”

Price action across cryptos was not drastically different from the stock market, where the

Dow Jones Industrial Average
and

S&P 500
 were on track to edge lower after a substantive rally last Friday. The correlation between digital assets and equities means that Bitcoin is likely to see moves on the back of macro news in the days ahead, with investors particularly focused on U.S. consumer-price index data coming Thursday.

Bitcoin has declined almost 20% in two months following the bankruptcy of crypto exchange FTX in November, but has slowly edged higher from two-year lows around $15,500 as crypto traders hope this bear market has bottomed out. Technical market factors suggest there is still some downside risk.

“A short-term overbought ‘sell’ signal … suggests the rally will stall this week,” said Katie Stockton, managing partner at technical research group Fairlead Strategies. “There has been a gradual loss of long-term downside momentum, but there are no ‘buy’ signals to suggest a major low is in place.”

Fairlead sees the next resistance point for Bitcoin at the $18,400 level, “but we do not foresee this level being surmounted in the near term,” Stockton said, adding that “once the rally falters, we expect a downdraft to take Bitcoin back to support near $15,600.”

Beyond Bitcoin,

Ether
—the second-largest crypto—was up less than 1% to near $1,350, exhibiting similar price action as its biggest peer after notching gains. Smaller cryptos or altcoins were more downbeat, with

Cardano
down 3% and

Polygon
2% in the red. Memcoins were slightly stronger, with

Dogecoin
just above flat and

Shiba Inu
rising 2%.

Write to Jack Denton at jack.denton@barrons.com