Bitcoin briefly topped a key technical level Monday, breaching its 50-day moving average of $42,800.- Traders are optimistic the token's prospects are brightening after sharp declines in recent months.
Bitcoin jumped above its 50-day moving average – a closely watched technical level – for the first time since November on Monday when it briefly topped $42,800, as traders grew optimistic about a rebound in the cryptocurrency after a major sell-off.
The token was up 2.6% to $42,766 on Monday morning, after paring some of its gains, according to Bloomberg data.
It had risen as high as $43,000 at about 1 a.m. ET, after jumping on Friday following a strong US jobs report and better-than-expected earnings from Amazon. Bitcoin has increasingly been trading in line with stocks in recent months.
Bitcoin investors are hoping that the show of strength over the weekend is a sign of an impending rally. Traders watch the 50-day moving average closely and often trade around it.
The idea is that a move above the average, which has recently been trending downwards for bitcoin since November, suggests an asset is breaking out of its recent path in a positive direction.
Investors were also excited about bitcoin's rise through the major round-number level of $40,000 on Friday.
"If Bitcoin manages to hold the 50-day moving average as support, that would be a good sign for potential further momentum," Marcus Sotiriou, analyst at UK digital asset broker GlobalBlock, told Insider.
Fundstrat strategist Mark Newton said in a note that Friday's rally was an important breakout "that likely results in further near-term strength."
Yet Sotiriou said he thinks bitcoin is likely to struggle to go much higher than $47,000, with a number of worries still weighing on prices. He said Thursday's US inflation data will be key, "as macro remains the driver in this market for now."
Bitcoin remained in the red for the year on Monday morning, and was well off November's record high of close to $69,000.
Many analysts think the outlook is murky for the world's biggest cryptocurrency and that it could struggle as the Fed turns off the stimulus taps and investors pivot towards more economically sensitive assets such as shares in energy companies and banks.