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

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Bitcoin prices are hovering near the highest levels in a month after a recent rally.


Rut­mer Visser/Dreamstime


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

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