Bitcoin recovery gaining speed

Cryptocurrencies are on the rise once again, with bitcoin pushing towards the $10,000 mark. Could this be the beginning of another surge higher for bitcoin prices?

Bitcoin
Source: Bloomberg

Bitcoin has been surging higher recently, with BTC/USD gaining 45% over the space of three weeks. Coming off the back of a period that seemingly focused on claims that we were seeing the bubble finally burst, there is a feeling that markets are seeing a more optimistic tone return for cryptocurrencies. With a host of countries having reviewed what steps to take with respect to targeting the sector, we are now moving into a period that should have greater certainty from a policy standpoint.

One factor helping things along will be the passing of the deadline for the completion of US Federal income tax, which occurred on 17 April. We have seen a circa 16% gain since that date. With substantial tax payments due for such a blockbuster year, there is no doubt that the tax-selling seen in recent months will have played a significant role in dragging crypto prices lower over recent weeks. Given the substantial sell-off we have seen in crypto prices, it would make sense for many large crypto holders to declare their earnings at this current rate in order to shift assets into a more tax-efficient holding method. The gains we have seen since that tax day point towards a feeling that the shackles have been taken off somewhat.

Looking across the spectrum at some of the altcoin, we are seeing a sharp rise in some of the smaller cryptos as well, with ripple (XRP/USD +88%), bitcoin cash (BCC/USD +93%), ether (ETH/USD +34%) and stellar lumens (XLM/USD +34%) all gaining significant ground over the past week. This rise in altcoins highlights a significant shift in market confidence, which is something that has been missing for some time.

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On the charts for bitcoin, there is a clear shift in the rate of decline, with the price breaking through trendline resistance, passing through the $91.71 swing high today. That points towards a possible shift in mentality for bitcoin, with the $11,796 level providing the next major resistance to be broken. A break above there would provide a much more confident bullish signal, bringing about a long-term bullish double bottom formation. For now, there remains a risk that we are seeing a retracement, and with the price having passed the 50% level, the two remaining levels to watch are the 61.8% ($9733) and 76.4% ($10,512).

Given the rally through $9171 resistance and the 50% retracement, there is reason to believe we will see further upside in the near term. However, with the price approaching the apex of a rising wedge formation, it is worthwhile noting that we could see a breakdown in the near term to provide a retracement in this ascent. A break and hourly close below $8760 would provide us with a bearish short-term picture in such an eventuality. However, should that occur, there is a good chance we would be seeing a retracement of the rally from $7826. Unless we see a break below that level, such a pullback would be seen as a buying opportunity rather than a sign of weakness.

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