key takeaways
- Bitcoin has gained 1,500 points in market cap over the past 16 hours.
- The network is expanding, which suggests that there is potential for further growth.
- Bitcoin must hold above $38,500 to have a chance to rise to $41,570.
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After entering the monthly trading session on a weak note, bitcoin has bounced off an important support level. On-chain and technical metrics suggest further gains may be on the horizon.
Bitcoin Prepares for a Rebound
Bitcoin looks like it is gaining momentum for a relief rally. If successful, it could eventually surpass the crucial psychological level of $40,000.
The top cryptocurrency has fully recovered from the 4% drop at the start of the month. Bitcoin has gained over 1,500 points in market cap over the past 16 hours, briefly crossing the $39,000 mark. As the growth of the network turns positive, further gains could be made.
The number of new addresses created on the bitcoin network has been on an upward trend for the past two weeks. While bitcoin fell from a high of $43,000 on April 21 to a low of $37,350 on May 1, the number of new addresses created on the network increased from a seven-day average of 401,300 addresses to 421,800 addresses.
Such on-chain activity indicates a steady increase in user adoption over time, which could positively affect the price of bitcoin.
Furthermore, while the network is expanding, it appears that Bitcoin has broken out of a falling wedge developed on its four-hour chart. The height of the y-axis of the pattern suggests that an increase in upward pressure could push bitcoin towards the target of $41,570 by more than 8%.
However, bitcoin must continue trading above $38,500 for the bullish outlook to be valid.
If it fails to stay above the critical area of support, traders may be encouraged to exit their positions in anticipation of a downswing. A potential increase in selling pressure when the $38,500 support level is breached could send bitcoin to a recent low of $37,350 or result in a lower low of $35,950.
The top crypto assets have had a rocky few months amid macroeconomic uncertainty and exhaustion in the cryptocurrency market. Despite the optimistic outlook, it is still trading down more than 40% from its November 2021 peak of $69,000. At current prices, bitcoin has a market cap of approximately $741 billion.
Disclosure: At the time of writing, the author of this article holds BTC and ETH.