The spike in price has seen bitcoin rise to 17-month highs. At the time of writing, the BTC price had risen to $12,821, a gain of over $1466 on the day. Since then, it has pulled back slightly and currently sits at $12,244.
Crucially, some analysts have suggested technical charts are showing indicators last seen in January 2018. These are usually associated with the beginning of speculative bubbles – where strong price growth attracts new bitcoin investment, which fuels further growth.
CoinDesk analyst Omkar Godbole said that it was impossible to rule out a correction to $11,000. He added, though, that there are signs that another significant bitcoin rally could take place over the coming months.
“With bitcoin’s rise to 17-month highs, the Mayer multiple (a ratio of price to the 200-day moving average) is teasing a break above 2.40 – a level that has marked the beginning of speculative bubbles in the past. BTC may see a short-lived spike to resistances at $17,230 (January 2018 high) and possibly to $20,000 (record high) if the Mayer multiple finds acceptance above 2.40.”
“The hourly chart is flashing signs of buyer exhaustion, however, so a correction to $11,000 cannot be ruled out. A UTC close below the May 31 high of $9,097 would abort the bullish view.”
It is impossible to say whether the current rally is the start of a rise towards $20,000. As Godbole noted, it is likely that prices will meet with some resistance at key price points along the way, should the upwards price pressure continue.
Yes, there are still risks for bitcoin bulls, namely the possibility of a significant reversal. Nevertheless, the technical indicators are pointing to continued strong trading over the coming days and weeks.
There are some signs bitcoin may be currently overbought, and it is still appropriate to be cautious. However, as previously rallies have shown, there could still be some room for growth yet before it hits the top.
The news comes amid a renewed boom in demand for cryptocurrency mining hardware. Supply shortages are likely to continue to throttle new bitcoin supply for at least the next couple of months.