The sudden burst in the market for bitcoin (BTC) might lose momentum quickly, crypto analysts said.
On Friday the largest cryptocurrency by market value rallied over 10% to the $21,000 level, its largest daily gain in six months.
BTC was trading at $21,180 as of 3:08 p.m. ET. As recently as Tuesday the price had dipped as low as $18,500.
“If buyers continue with the same sentiment, even an area of $22,400-$23,000 could be reached,” Daniel Kostecki, senior market analyst at Conotoxia, told CoinDesk in an email.
The CoinDesk Market Index, which gauges the broad performance of 148 digital assets, rose 5.8%, helping to push the industry’s overall market capitalization past $1 trillion.
The move could be seen as “part of the larger realization of the undervalued digital asset market,” according to Sheraz Ahmed, managing partner at blockchain solutions provider Storm Partners.
Ahmed suggested in a Telegram message that the price rebound is tied to multiple factors, including the European Central Bank’s interest rate hike on Thursday and FTX Ventures buying a 30% stake in Anthony Scaramucci’s SkyBridge Capital.
The bitcoin price jump still drew into the industry’s concerns on whether this sudden reaction could be seen as a positive in the long term.
Investors might “sell it off at any moment,” Kostecki said.
The bitcoin price was up 7.1% in the past month but still fell by 10.1% over the past 30 days because of high volatility over the summer.
Joe DiPasquale, CEO of crypto hedge fund manager BitBull Capital, said Friday’s bitcoin price action can be attributed to “typical short covering and a squeeze, since not much has materially changed in the macro environment.”
“We don’t expect a long-lasting trend shift at the moment and look forward to further accumulation around and below the $20K region for BTC,” he told CoinDesk via a text message.