Bitcoin has risen above the psychologically-important $21k mark, having punched past its 20-day simple moving average (SMA) and is now testing resistance around the early-November 2022 peak.
With its year-to-date (YTD) gains exceeding 27% at the time of writing, this marks Bitcoin’s best start to the year (first 16 days of any calendar year) in over a decade, back when crypto was still in its mere infancy.
For comparison, Bitcoin surged by 57% in the first two weeks of 2012.
Pullback due soon?
However, note how Bitcoin prices have also reached extreme “overbought” conditions, judging by the fact that its 14-day relative strength index (RSI) has far exceeded the 70 threshold that denotes overbought levels.
The last time this RSI exceeded the 90 level was back in early January 2021, when Bitcoin surged past the $40k mark for the first time ever.
Prices then duly saw a technical pullback, dipping below the $30k – a psychologically-important region which would offer crucial support for Bitcoin over the summer of 2021.
Perhaps of more encouragement for crypto bulls, following that January 2021 pullback, Bitcoin then went on to surge by about 125% within a span of 3 months to reach a then-ATH (all-time high) at $64,869.78 in April 2021.
The ensuing drop then saw Bitcoin shedding over 50% of its value, dipping below the psychologically-important $30k mark before running back up to its ATH just shy of the $69k mark – a record high which stands till this day.
Whether the above-mentioned price action can be emulated is anyone’s guess.
After all, the world’s oldest crypto remains about 70% below its existing ATH (all-time high) posted back in Nov 2021.
To flip that around, Bitcoin has to climb by about 230% from current levels to post a fresh record high!
Such a feat would be almost unthinkable just a few weeks ago, given the macro woes highlighted by many market commentators, including yours truly, coming into 2023.
Is FOMO creeping back into crypto?
Allow me to repeat the final paragraph in our previous weekly crypto article (published every Tuesday):
“Yet with each precarious step upwards, crypto may then be able to entice sufficient mass of investors and traders to return from the sidelines and take such risky bets once more, even while the brutal scars from 2022’s meltdown remain fresh on the market’s collective mind.”
Despite its volatile nature, cryptos have shown characteristics of acting like a Veblen good = when prices rise, demand increases (as opposed to traditional economics which has a central tenant that demand falls when prices rise).
In fewer words, perhaps this latest surge in crypto is in turn teasing the return of FOMO.
But FOMO alone may not be sufficient in forming a solid-enough base from which Bitcoin can sustainably build on its stellar start to 2023.
Ultimately, broader market sentiment has to remain conducive for more risk-taking activities to permeate across global financial markets, with some of such activities then feeding into the crypto world as well.
All that said, it remains to be seen whether the bullish sentiment evident now in Bitcoin’s call options and futures, can stand the test of time, and that of macro market drivers.