Is this the start of a new comeback or just a momentary pause before another downfall?

Bitcoin seems to have stabilized. Prices have started a slight rebound and are now at a two-week high. The king of crypto-currencies crossed the symbolic threshold of $40,000 per unit for the first time on Friday February 4, a first since January 22.

It was trading around $41,627 at the time of writing. Admittedly, we are still far from the record of $69,044.77 crossed on November 10, but it is a level that will undoubtedly appeal to cryptocurrency evangelists.

Bitcoin is dragging the rest of the cryptocurrency market in its wake: Ether, the native currency of the Ethereum blockchain, rose 5.9% on Saturday to $3,029.42, while its main rivals Solana, Avalanche gained 9.2% and 9.5%. Solana, the Visa of Crypto, suffered this week from the theft of more than $320 million from the decentralized finance (DeFi) project WormHole, which connects the Solana blockchain to other decentralized blockchain networks.

The market as a whole has picked up some color again: the crypto market value has thus climbed a little above $2 trillion, according to CoinGecko. It thus recovered at least 300 billion dollars in just a few days.

These gains, just as violent as the recent falls, are further proof of the volatility of cryptocurrencies.

In terms of fundamentals, nothing really justifies this rebound.

Is this a Bitcoin Short Squeeze?

The strong January monthly jobs report released on Friday was normally likely to drive down cryptocurrency prices. Because in theory, the figures published by the US Department of Labor should push the Federal Reserve to aggressively raise interest rates to avoid overheating the labor market. Bitcoin traditionally reacts poorly to monetary policy tightening, which benefits less risky financial assets more.

The Bureau of Labor Statistics said 467,000 new jobs were created last month, with the overall unemployment rate falling from a post-pandemic low of 4%. The January tally was firmly ahead of Street’s consensus forecast of 150,000.

But at the same time, Marathon Digital Holdings, one of the largest bitcoin self-mining companies in North America, announced on Friday that it had increased the number of bitcoins in its possession to 8,595 bitcoins from worth $338 million in January.

By continuing to produce bitcoin at such a high rate – +816% compared to January 2021 – Marathon shows that it believes in bitcoin for the long term.

“In January, we improved our bitcoin production by 816% year over year, as we produced 462 bitcoins during the month and increased our bitcoin holdings to 8,595 BTC,” said Fred Thiel, CEO of Marathon, in a press release.

He added that: “We have strengthened our technical team to research immersion and other solutions that could allow us to further optimize the performance of our mining fleet.”

“Bitcoin shrugged off falling payrolls and rallied to momentum buying. The $40,000 cap could be tested,” wrote Edward Moya, senior market analyst at forex broker Oanda in a note.

It cannot be ruled out that the recent rally was due to a short squeeze.

A short squeeze often occurs when many investors who have bet the security or stock will fall all try to liquidate their positions at the same time. This race usually causes a strong demand for stocks or financial assets.