Wolfe Research Says Bitcoin Needs A Pause Before Continuing Its Bullish Trend

Since the start of the year, Bitcoin has rallied more than 40%, which has allowed it to quickly recover from the losses it suffered in 2022. Despite this, Wolfe Research believes that there is still time for the crypto bulls to make a comeback.

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In a statement this week, the firm's Rob Ginsberg said, "Bitcoin is still trading at the deepest overbought condition it has been in over two years.". "Sometimes these extended overbought signals can be a sign of momentum, but our sense is that it's time to do a brake check on it."

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According to Coin Metrics, it appears that the cryptocurrency will finish the week up again, this time by about 2%, as it is on track to finish higher. The price of the stock climbed up over night on Tuesday to $24,249.70, its highest level since Aug. 17 and close to Wolfe's secondary target of $24,500, which was set at the end of last week.

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After ending up with a 64% loss in 2022, bitcoin surged 39.6% in January, which was its best month since October 2021 as well as its best January performance since 2013.

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There was some optimism among investors about the possibility that the Federal Reserve would slow down its rate hikes in the near future as a result of a lower inflation reading in January. As soon as the Federal Reserve said at the conclusion of its policy meeting that the "disinflationary process has started," bitcoin began to climb again.

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Despite the initial breakout attempt, Ginsberg said he is "encouraged by this first attempt" and he sees the bullish trend in the market as a structural shift, but he believes the gains should be digested on a healthy basis in order.”

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“There is no doubt that an overbought condition of this extreme is unsustainable regardless of the security," he said. “The price of bitcoin is likely to fall back within its range before we see any significant increases in the near term.”