BTCUSD rallies 18% as $25,000 psychological level comes into focus

BITCOIN AND CRYPTO KEY POINTS:

READ MORE: Fed steps in to avoid systemic risks after SVB Fallout. Is the S&P 500 safe?

Bitcoin continued its rally today, benefiting from the US Treasury Department’s announcement that it would act as a lender of last resort, effectively guaranteeing all US bank deposits, even the uninsured. The world’s largest cryptocurrency by market capitalization rose around 18% on the day and is now up around 25% since Friday last week.

The rally has been something of a surprise given the implosion of SVB and Signature bank, both of which were seen as crypto-friendly institutions. We also saw the decline in USDC over the weekend losing its peg to the US Dollar and falling below the 0.92 handle on Saturday as news surrounding SVB filtered through the crypto market, before rebounding to regain its peg to the US Dollar on Monday. Security of stablecoins became a hot topic over the weekend, especially on social media, as evidenced by the announcement made by Changpeng Zhao, CEO of the largest global exchange, Binance. Zhao announced the conversion of some of his branded stablecoin, Binance USD to Bitcoin, Ethereum and its internal BNB.

COMBINATION OF SVB A EUREKA MOMENT FOR BITCOIN AND CRYPTO?

However, many Bitcoin and Crypto observers see the collapse of the SVB bank as something of a Eureka moment for the industry. Some believe that the collapse highlights the flaws in the fractional reserve and traditional monetary systems and could facilitate an increase in the adoption and interest in self-storage in the form of hardware wallets.

Looking at the numbers today, it’s hard to disagree with the view that SVB and Signature bank’s spectacular failure could serve as an advertisement for the adoption of self-storage and the promotion of cryptocurrencies in a world where holdings of physical cash have become somewhat obsolete . and, in some cases, “refreshed”. According to data from Coinglass, about $160 million in short bitcoin positions and about $300 million in Crypto positions were liquidated on Monday.

Could it be that despite the growing scrutiny of the crypto industry and the spectacular demise of FTX late last year, this latest development is breathing new life into crypto and self-custodial adoption…? I think it’s too early to tell, but it hasn’t stopped the enthusiasm of Bitcoin advocates, and instead has had the opposite effect.

TECHNICAL OUTLOOK

From a technical point of view, the current rally in BTCUSD began on Friday the 10th. March when it found support at the 200-day MA around the $19700 handle. We had seen a golden cross a few days earlier, and one could point to the recent rally as a delayed reaction, but given the macro conditions at play, the rally was nonetheless impressive.

On the daily time frame, we have broken two key resistance areas (blue lines on the chart) at around $22500 and $23750 respectively with a daily candle close above needed to confirm the momentum of the rally. However, the key psychological $25,000 handle remains key if we are to see further upside as we have been fighting to break above this price point since June 2022. A daily candle close above the $25,000 mark opens up a retest of resistance at $28,000 (May 2022 swing low) and beyond the $30000 mark.

Alternatively, a rejection could see the price test the resistance levels now at $23750 and $22500 respectively. Exciting times ahead for Crypto and Bitcoin which usually thrive in periods of increased volatility.

BTCUSD Daily chart, March 13, 2023.

Source: TradingView, chart prepared by Zain Vawda

— Written by Zain Vawda for DailyFX.com

Contact and follow Zain on Twitter: @zvawda