BITCOIN:SELL Resistance Bearish Channel Fundamentals SHORT

On Tuesday, a tailwind kicked up on Wall Street as investors finally decided that they had had enough of their bad days. Futures contracts on the Dow Jones Industrial Average, S&P 500, and Nasdaq Composite were all up 1-2%, and it looked like the major market indexes would have a good morning after the S&P hit new lows of 2022 in late Monday trading.

Bitcoin also returned above the $20,000 mark after recent heavy pressure, and many other digital assets and cryptocurrency stocks showed significant gains. However, with bitcoin and Ethereum still down significantly from their respective 2021 highs, the unanswered question is whether Tuesday's rally will finally be the one that ends the gloomy mood in the cryptocurrency market, or whether it will simply come to naught like many other rebound attempts in recent weeks.

Bitcoin's 7% rise to around $20,250 was indicative of many digital assets. Ethereum is also up more than 7%, breaking the $1,400 mark for the first time in a week. Solana and Chainlink were up 7% and 9%, respectively, and Uniswap was the top gainer among major digital assets, jumping 18%.

Cryptocurrency stocks also did well in premarket trading Tuesday morning. Coinbase Global was up more than 6%, while mining companies Marathon Digital Holdings and Riot Blockchain were up 8% and 7%, respectively. MicroStrategy, which is more known for its balance sheet being heavily tied to bitcoin than its core business, was up nearly 6% Tuesday morning before the regular trading session began.

Many cryptocurrency observers saw the dynamics of the U.S. dollar as a key reason for the jump in bitcoin and other digital assets. Investors are increasingly concerned about the pace at which the U.S. dollar is rising against key foreign currencies, most notably the British pound, which fell to multi-decade lows earlier this week.

However, at least today the dollar took a breather. The pound rose more than 1% against the U.S. dollar, climbing to $1.08. The euro rose slightly but remained below parity at $0.965.

However, it is important not to exaggerate the role that currency markets can play in curbing the value of cryptocurrencies. Even if you measure the value of bitcoin in British pounds, for example, the price of the leading digital asset is still down more than half from its late 2021 peak.

In the short term, political tactics aimed at slowing the market could halt the decline in asset prices, whether of stocks, currencies, or cryptocurrencies. In the longer term, however, macroeconomic factors will continue to play an important role, and this is where investors face the most uncertainty.

At least for now, digital assets such as bitcoin have proven disappointingly correlated with the faster-growing part of the stock market. Just as rising interest rates have called into question the extent to which smaller, more speculative companies will be able to raise the necessary capital to fuel future growth, it has also caused cryptocurrency investors to focus more cautiously on fundamentals rather than the highly leveraged trading instruments that cause much of the volatility in cryptocurrency markets.

This correlation could play into bitcoin's hands if stock markets begin a sustained rise from current levels. In the long run, however, if bitcoin wants to reach its full potential, it will have to prove that it is still a very different asset class, capable of demonstrating superiority regardless of what other markets are doing. This was the case at the beginning of bitcoin's history, but skeptical investors need to see it again in order to restore confidence in the digital asset market.

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