

Nearly everything is coming up roses for bitcoin after the apparent conclusion of a cryptowinter that has seen the No. 1 digital currency soar 66% in May.

Now, bitcoin BTCUSD, +0.71% looks not far from breaking above a psychologically significant level at $9,000, retracing its more than yearlong slump and reigniting newfound bullishness among crypto and blockchain enthusiasts.

Bitcoin futures on the CME last changed hands at $8,700 US:BTCK19, up 7.6% on Tuesday. The crypto asset touched a 52-week peak at $8,938.27 on May 26, based on CoinDesk prices over the extended Memorial Day holiday weekend.

Bitcoin is up about 140% so far in 2019, compared with a gain 15.3% for the Nasdaq Composite Index COMP, +0.36% , an advance of 12.8% for the S&P 500 index SPX, +0.29% and a year-to-date return of 9.8% for the Dow Jones Industrial Average DJIA, +0.19% .

Dow Jones Market Data

The recent gains have helped a bullish golden cross to form in bitcoin. Based on bitcoin’s Comex values, bitcoin’s 50-day moving average at $5,631.73 crossed above its long-term 200-day moving average at $5,153.65, according to FactSet data.

Many technicians believe that when the 50-day average crosses above the longer-term 200-day line, that this relatively rare event marks the point where a shorter-term rebound morphs into a longer-term uptrend. That bullish pattern began to take shape in bitcoin back on May 20.

It isn’t precisely clear why bitcoin has taken flight after its lengthy fallow period. It is also important to note, however, that the asset remains about 56% down from its December 2017 peak. The nascent asset has been inherently volatile, with a tendency to show violent intra- and interday swings.

Researchers at Bespoke Investment Group, in a note dated May 22, said that the virtual currency created back in 2009 has seen similar periods of protracted, deep selloffs and that has tended to be followed by strong upsurges. The researchers warn that it is impossible to know for certain if bitcoin is establishing a more constructive uptrend or if gains will be sustainable.

Here’s how Bespoke put it:

Believe it or not, though, the current drawdown isn’t even the largest peak to trough decline that Bitcoin has seen in its short history. In between the all-time highs from June 2011 through early 2013, Bitcoin’s price fell more than 93%, and then in the period between December 2013 through March 2017, the price declined nearly 84%. Needless to say, the cryptocurrency’s price is volatile!”

Here’s a look at past severe bitcoin selloffs, or drawdowns:

Here’s a chart of the length of such selloffs before an uptrend: