Can bitcoin sustain its rally? Here’s what to watch. - MarketWatch

Smaller cryptocurrencies also surged Wednesday, with ether ETHUSD, +0.44% up 5.8% over the past 24 hours to around $1,594, according to CoinDesk data. Binance Coin BTCUSD, +2.11% gained 3.3% to roughly $270.3, and XRP XRPUSD, -0.41% rose 3.9% to $0.38. Dogecoin DOGEUSD, +3.13% rallied almost 10% to $0.07, and Shiba Inu SHIBUSD, 1.40 advanced 8% to around 0.00001. 

“Like many risk assets, the crypto market is benefitting from investors ratcheting down their expectations for the Fed’s peak interest rate this cycle to around 3.75% around the end of the year,” ​Matt Weller, global head of market research at Forex.com wrote in a Wednesday note. U.S. stocks rose Wednesday, building upon Tuesday rallies.

See: How high will the Fed have to push up interest rates to cool down inflation? No one knows

“As long as the Fed sticks to a 75bps rate hike in its July meeting, the crypto rally could extend further,” Weller wrote. “However, it’s worth noting that both Bitcoin and Ethereum saw bigger counter-trend rallies within the 2018 bear market before ultimately falling to new cycle lows, so longer-term investors shouldn’t wave the ‘all clear’ flag yet.”

Katie Stockton, founder and managing partner at Fairlead Strategies, echoed the point. “The rally is strong, but with short-term overbought conditions having returned already, we feel it is premature to call it the start of a lasting reversal,” Stockton wrote. 

From the technical perspective, a sustained relief rally would be indicated by “a breakout above cloud-based resistance near $25,000, a weekly MACD ‘buy’ signal and weekly stochastics above 20% in an oversold upturn”, according to Stockton. 

On the derivatives front, trading volumes and open interests in bitcoin futures, which measure the total number of outstanding contracts, both picked up over the past few weeks, noted Corey Miller, at decentralized exchange dYdX.

“It does seem like more traders are coming back into the market,” according to Miller. “The more traders continue to come back into the market, the greater the potential for this rally to sustain.”

Still, the market is continuing to digest contagion from the bankruptcy of digital asset hedge fund Three Arrows, lender Celsius and broker Voyager Digital. One of the latest casualties may be Singapore-based crypto exchange ZIPMEX, which said Wednesday that it would pause user withdrawals.