Friday, December 9, 2022

Bitcoin Looks Set to Stage a Relief Rally

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Key Takeaways

  • Bitcoin has regained 1,500 points in market value over the past 16 hours. 
  • The network is expanding, which suggests there is further upside potential. 
  • Bitcoin must hold above $38,500 to have a chance at surging to $41,570. 

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Bitcoin has rebounded from a crucial support level after entering the monthly trading session in weak form. On-chain and technical metrics suggest that further gains could be on the horizon.

Bitcoin Prepares to Rebound

Bitcoin looks like it’s gaining momentum for a relief rally. If it succeeds, it could eventually move past the crucial $40,000 psychological level.

The top cryptocurrency has fully recovered from the 4% dip it took at the beginning of the month. Bitcoin has regained over 1,500 points in market value over the past 16 hours, briefly crossing the $39,000 mark. As network growth has turned positive, further gains could lie ahead.

The number of new addresses created on the Bitcoin network has been trending upwards for the past two weeks. While Bitcoin dropped from a high of $43,000 on Apr. 21 to a low of $37,350 on May 1, the number of new addresses created on the network increased from a seven-day average of 401,300 addresses to 421,800 addresses.

Such on-chain activity indicates a sustained increase in user adoption over time, which could positively impact Bitcoin’s price.

Bitcoin Network Activity
Source: Glassnode

Moreover, while the network is expanding, Bitcoin appears to have broken out of a falling wedge that developed on its four-hour chart. The height of the pattern’s Y-axis suggests that a spike in upward pressure could push Bitcoin by more than 8% toward a target of $41,570.

Bitcoin Price Chart
Source: TradingView

However, Bitcoin must continue to trade above $38,500 to validate the optimistic outlook.

If it fails to hold above the critical area of support, traders could be encouraged to exit their positions in anticipation of a downswing. The potential increase in selling pressure upon a break of the $38,500 support level could send Bitcoin to retest the recent low at $37,350 or result in a lower low at $35,950.

The top crypto asset has had a rocky few months amid macroeconomic uncertainty and exhaustion in the cryptocurrency market. Despite the optimistic outlook, it’s still trading over 40% down from its $69,000 peak recorded in November 2021. At current prices, Bitcoin’s market cap is about $741 billion.

Disclosure: At the time of writing, the author of this piece owned BTC and ETH.

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