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The beginning of 2023 has provided Bitcoin (BTC) with bullish indicators and the rally to a year-to-date high at $21,647 has crypto traders hopeful that the worst part of the bear market has ended. The surge effect of BTC’s bullish price action is also carrying over to Ether (ETH) and Bitcoin mining stocks.

The reduction in Bitcoin Fear and Greed index to neutral is possibly driven by volume increases, Bitcoin on-chain data and BTC price decoupling from equities markets. While not all analysts believe a market bottom is in, let’s dive into the data.

Trading volume and volatility return

Bitcoin’s price spike has been accompanied by massive growth in trading volume. Over the last week, BTC volume has more than doubled, reaching $10.8 billion, a 114% increase over sevendays.

Increased trading typically correlates to an increase in volatility. While the current 2.4% seven-day volatility levels are still below the 2022 seven-day average of 3.1%, Bitcoin has remained consistent during the 2023 rally.

Centralized exchanges (CEX) have been struggling with low trading volume, meaning lower fees for the business, inducing layoffs. The increase in volume for all exchanges is likely welcomed news.

After 66 agonizing days, Bitcoin (BTC) price finally broke above the $20,000 psychological resistance on Jan. 14. At the same time, the current $400 billion market capitalization gives BTC a position in the top-20 global tradable assets, surpassing giants like Walmart (WMT), Mastercard (MA) and Meta Platforms (META).

From one side, Bitcoin bulls have reasons to celebrate after its price recovered 34% from the $15,500 low on Nov. 21, but bears still have the upper hand on a larger time frame since BTC is down 52% in 12 months.

However, two events are expected to determine traditional finance investors' fate. On Jan. 16, China will announce its Gross Domestic Product figures and on Jan. 18, the United States Retail Sales will publish.

Fourth quarter earnings season will set the tone for this week's stock market performances, including Goldman Sachs (GS), Morgan Stanley (MS), Netflix (NFLS) and Procter & Gamble (PG).

In the cryptocurrency markets, there is mild relief stemming from some unexpected places — or people. Crypto entrepreneur Justin Sun is reportedly interested in acquiring assets from the troubled Digital Currency Group (DCG), the parent company of the crypto lender Genesis and the Grayscale funds' administrator.

Bitcoin’s (BTC) price has followed a four-year cycle, with consecutive bull and bear trends occurring in somewhat measurable intervals. A closer look at Bitcoin’s long-term price action reveals that the run-up to the top and bottom of the previous cycles look remarkably similar. What’s more interesting is that the 2020–2021 cycle shows signs of following the same pattern.

Independent market analyst HornHarris found that the period between the bottom-to-top and top-to-bottom has been the same since 2015: 152 weeks and 52 weeks, respectively.

Even in 2013, the bear market lasted 58 weeks, only a six-week difference from the other two cycles.

Another resemblance with the last bottom formation is the similarity between Bitcoin’s current uptrend and the one in 2019, when the primary catalyst was prevalent negative investor sentiment. Bitcoin price gained nearly 350% from the bottom of $3,125, and it didn’t drop below this level moving forward, marking the previous cycle’s bottom.

Four years later, the conditions have changed, but the underlying reason for the latest 30% surge in Bitcoin’s price was still the market expecting lower prices due to macroeconomic headwinds. The lack of positive sentiment and build-up of short positions in the futures market may have allowed buyers to stage a disbelief rally to hunt short-order liquidations and incite FOMO — fear of missing out — among investors who had been sitting on the sidelines.

Risk assets have started the new year on a strong note. The S&P 500 (SPX) and the Nasdaq closed in the positive for the second successive week and also notched their best weekly performance since November. 

Bitcoin (BTC) led the recovery in the crypto markets with a sharp 21% rally last week. That sent the Bitcoin Fear and Greed Index into the neutral territory of 52 on Jan. 15, its highest since April 5, 2022. However, the index has given back its gains and is again back into the Fear zone on Jan. 17.

The strong rally in Bitcoin has divided analysts' opinions. While some expect the rally to be a bull trap, others believe that the up-move could be the start of a new bull market. The confirmation of the same will happen during the next dip. If the cryptocurrencies form a higher low followed by a higher high, it will suggest that the downtrend could be over.

Could the S&P 500 extend its rally? What are the critical levels on BTC and the cryptocurrencies to watch out for? Let’s study the charts to find out.

SPX

The S&P 500 continued its recovery last week and has reached the downtrend line. The 20-day exponential moving average (3,904) has started to turn up and the relative strength index (RSI) is in the positive territory, indicating advantage to the buyers.

Bitcoin (BTC) spiked higher around the Jan. 17 Wall Street open as nervous analysts waited for further cues.

Opinions diverge over Bitcoin's fate

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD briefly touching $21,594 on Bitstamp, marking its highest since Sep. 13.

As bullish impulses continued to hit the chart, reactions stayed conservative amid an atmosphere of suspicion over the true source of Bitcoin’s return to form.

One such cautious take came from Michaël van de Poppe, founder and CEO of trading firm Eight, who eyed behavior around a key exponential moving average (EMA) across crypto.

“Food for thought; Total market capitalization and the altcoin market capitalization are both at the 200-day EMA's, while Bitcoin is barely breaking it without any volume,” he noted.