Analyst declares crypto winter over as bitcoin holds near $86,000

Bitcoin (BTC-USD) held near $86,000 on Tuesday following a multi-session rally that led some analysts to declare the end of the cyclical "crypto winter." Fundstrat head of digital assets Sean Farrell told Yahoo Finance on Monday that the breakout is credible, though he cautioned that the path higher will not be linear.

The token jumped more than 5% on Friday and another 6% on Monday, driven by risk-on sentiment amid falling oil prices. Compass Point analyst Ed Engel wrote on Tuesday that crypto is in the early innings of a new bull market with few signs of overheating. Nicolai Søndergaard, senior research analyst at Nansen, attributed the move to a combination of renewed ETF demand and a large short squeeze, where traders betting against bitcoin are forced to buy it back.

Technically, the asset has cleared its 50-day moving average. Strategists consider this break significant because it suggests the current upswing is not merely a temporary recovery within a bear market. Broader market sentiment also lifted as the Securities and Exchange Commission issued a five-year exemption last week for trading specific tokenized stocks. This regulatory action increased optimism regarding blockchain-based markets and assets like ether (ETH-USD) and solana (SOL-USD).

These developments followed the Senate's failure to pass the Clarity Act, which proposed a regulatory framework for digital assets. On Monday, the total capitalization of the cryptocurrency market was $2.94 trillion. This figure sits roughly 30% below the record valuation seen in October, when bitcoin hit an all-time high above $125,000.

The recent gains continue a trend that began in August, when bitcoin rose approximately 25%. That earlier rally followed Treasury actions to buy back bonds and support the Japanese yen, steps Wall Street viewed as attempts to lower Treasury yields. While higher yields typically raise borrowing costs for governments and private borrowers, crypto assets have appreciated even after the Federal Reserve increased interest rates. Markets are currently pricing in a 56% probability of another rate hike this year.