The crypto market saw a nice relief rally on Friday with total market capitalization rising 4.23% to $1.62 trillion at press time. Bitcoin led the charge, with its price increasing around 5% over the last 24 hours to trade near $42,000.
After plunging below $40,000 earlier this week, Bitcoin found support in the $38,000-39,000 area. On Friday, its price pumped back above $42,000, marking its best single-day performance so far in 2024 in terms of percentage gain.
Ethereum has not kept pace with Bitcoin’s gains this week. While Bitcoin is now up 0.5% on the week, Ethereum is down around 9% and trading around $2,267.
So, the rally in crypto prices seems to be more related to oversold conditions rather than any particular bullish news events. The Relative Strength Index (RSI), a technical indicator that measures the momentum and velocity of price changes, hit 51 on the total crypto market capitalization daily chart. An RSI between 50 and 70 signals improving positive bullish momentum.
Moreover, traders likely used the lower prices earlier this week to load up on major altcoins at good entry points. For example, Bitcoin bulls may have waited for the price to fall below $40,000 before stepping in to buy.
Zooming out on the total crypto market capitalization chart shows the market has been trading in an ascending channel pattern over the past four days since January 23rd. As seen on the chart from TradingView below, this is illustrated by the blue channel lines angling upward.
This indicates overall positive momentum, with total market cap bouncing off support and testing resistance repeatedly over this short time period. If this channel pattern continues, it could signal a potential trend change and further relief ahead. However, continued fluctuations are expected given the volatility we’ve seen so far in 2024. Sustained trading within the channel would denote building positive momentum for the crypto market.
The channel pattern reflects the oversold conditions mentioned earlier that led traders to buy the dip. Bouncing within the channel path shows buyers are stepping in at area of chart support repeatedly during this period.
The news flow this week had been mostly bearish for crypto prices. The SEC delayed decisions on several Ethereum ETF applications, and Grayscale continued offloading large amounts of its Bitcoin holdings. However, technical factors and oversold conditions seem to be driving Saturday’s relief rally more than the news.
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