The current Bitcoin rally may continue. Trading sentiment is more bullish than ever.

On Wednesday, the price of Bitcoin BTCUSD -1.08% and other cryptocurrencies increased. Cryptocurrencies are currently fairly range-bound after a raging run to start the year, but important catalysts are still ahead and there is at least one indication that traders are more confident than ever.

‍

A price level around which it has been trading for the most of the past few weeks, the price of Bitcoin has increased 1% over the past 24 hours to close to $23,200. The greatest digital asset has increased by around 40% since the beginning of the year, climbing from lows reached almost two years ago with the failure of the cryptocurrency exchange FTX in November to trade at levels not seen since last summer.

‍

According to Yuya Hasegawa, an analyst at cryptocurrency exchange Bitbank, "Bitcoin managed to recover from the lower bound of the current two-week-long range, but it is still battling to pick a direction." The CPI announcement will probably be the next significant event, but there are still other lectures by Fed officials this week, and the market should continue to be cautious.

‍

In fact, macroeconomic factors are more likely to have a significant impact on cryptocurrency values. This year's advance in digital assets has coincided with comparable stock market activity, as rising risk appetite among investors has also pushed up the Dow Jones Industrial Average and S&P 500 in addition to Bitcoin.

‍

The Federal Reserve should be able to ease back on its aggressive monetary policy since investors are optimistic that the inflation rate, which has been decades high, is going downward. Last year, the Federal Reserve's interest rate hikes to combat inflation were a major drag on risk assets. A speech by Fed Chairman Jerome Powell that was perceived as dovish was the most recent factor bolstering risk sentiment, and more Fed officials are expected to speak in the coming days. Next week will provide important consumer price index inflation statistics.

‍

Investors will be searching for factors to sustain the surge as catalysts for Bitcoin are expected to emerge soon and the cryptocurrency market is mainly inactive following significant gains to start the year. The conviction of cryptocurrency owners, or "HODLers," who cling on for dear life, appears to be at record highs, which is a bullish indicator.

‍

According to researchers at cryptocurrency exchange Bitfinex, "Reserve Risk for Bitcoin recently fell to its lowest level ever (lower than the 2019 or 2020 low), which indicates that the HODLer conviction is close to record highs."

‍

The Bitfinex experts explained, "Reserve Risk is a long-term cyclical oscillator that simulates the ratio between the current price and the belief of long-term investors. "The present price is the inducement to sell, and the conviction in the ratio is a collection of sub-metrics that take into account the opportunity cost of not selling," says the author. Investor confidence is stronger when the ratio is lower.

‍

That's not necessarily a terrible omen, but investors would be wise to exercise care. Despite the crypto market's amazing gains so far in 2023, there are still many indications that a new bubble is developing, and the recent surge may have been entirely constructed on sand, according to a weak fundamental and technical background.

‍

Beyond Bitcoin, the second-largest cryptocurrency, EtherETHUSD -0.95%, increased 2% to $1,675. Cardano and Polygon both saw gains of 2% in smaller cryptocurrencies or altcoins.

‍

MATICUSD+3.80% increased by 3%. Dogecoin DOGEUSD -2.13% and Shiba InuSHIBUSD -3.44%, two memecoins, both increased by less than 1%, were the least active.