• Bitcoin has gained 4.4 percent in the past day, Ether is up 8.5 percent and Solana has gained 10 percent as the crypto market shows signs of recovery.
• Analysts are divided on whether the market can sustain the gains, with many pointing out that the answer may lie in forces beyond crypto.

The cryptocurrency market has had a better week after a torrid start to the new year. Bitcoin almost hit $38,000 after sustained gains while Ethereum is up 8.5 percent. Other tokens like Solana, Avalanche and Uniswap have gained over 10 percent in the past day to end the week on a high. But is the momentum sustainable?

At press time, BTC is trading at $37,835, up 4.32 percent in the past 24 hours. During that time, it set an intraday high of $37,952, taking its market cap above $700 billion.

Analysts point to the close correlation between the stock market and crypto as one of the biggest telltale signs of what happens next with Bitcoin. As more institutional investors invade the crypto market, their moves are having a bigger impact with each passing day. As such, whenever the stock market dips, Bitcoin is following suit.

Goldman Sachs summarized it, stating:

Mainstream adoption can be a double-edged sword. While it can raise valuations, it will also likely raise correlations with other financial market variables, reducing the diversification benefit of holding the asset class.

The S&P 500, one of the best indicators of the stock market performance in the U.S, is up 2.43 percent, indicating more positive sentiment in the market. This may be one of the key reasons Bitcoin is up as well.

However, zooming out, market data shows that more investors are exiting the stock market as the Fed continues to be more bearish and withdrawing liquidity from the market. With this in mind, analysts point out that the current market bounce could be limited and Bitcoin could dip once again in the near future.

J.P Morgan has become much less bullish as well. The bank, which once predicted that BTC would hit $150,000 in 2022, has scaled down its prediction to $38,000, which is around where BTC is trading today.

Our previous projection that the bitcoin to gold volatility ratio will fall to around 2x later this year seems unrealistic. Our fair value for bitcoin based on a volatility ratio of bitcoin to gold of around 4x would be 1/4 of $150,000, or $38,000.

The bank still backs Bitcoin, saying that even in dips such as this one, investors are less panicky nor are they abruptly unwinding their positions like they did a year ago.

Altcoins lead the crypto rally

Away from Bitcoin, altcoins have been having a good end to the week. Ether is up by over 8 percent overnight, the biggest gain in the top 10 to change hands at $2,570. Its market cap stands at $306 billion, way below the $20 trillion that ARK Invest believes it could be in ten years.

Other big gainers include Solana, Internet Computer and Chainlink at 10 percent. The Sandbox is up 14 percent while NFT mainstay FLOW is up 21 percent.

DeFi tokens have recorded a surge, with Uniswap, Avalanche, Terra, and Aave all gaining over 8 percent. This is despite this week seeing yet another DeFi platform exploited and millions stolen. As CNF reported, Qubit Finance was exploited and $80 million in BNB was taken, the seventh-highest amount stolen in DeFi.