(Bloomberg) -- Bitcoin gained for a second day, spurring optimism among the almost always bullish advocates of the bellwether cryptocurrency for an end to the months-long decline known as crypto winter. 

The virtual currency rose as much as 4.1% to $21,018, bringing its increase since Monday to as much as 7.8%. That’s helped to reduce this year’s decline to about 55%. Other digital tokens gained more on Wednesday, with Ether jumping 6.4% and Dogecoin increasing 13%. 

Crypto traders celebrated the advances, a welcome change after months of limited price action. Bitcoin broke above $20,000 for the first time in more than two weeks on Tuesday, ending its longest run below that price level since the token first breached the threshold in late 2020.

The upward movement could point to “a building crypto sentiment shift,” according to Noelle Acheson, author of the “Crypto is Macro Now” newsletter. 

“It remains to be seen whether this is enough to awaken the momentum traders, but it does feel like something has changed,” she said. Acheson pointed to high open interest, “hinting at more activity ahead as traders come back into the market.”

Bitcoin saw its largest amount of short liquidations since July 2021, she said. That suggests “at least some of the rise has been fueled by short-covering,” Acheson said. 

Aggregate short liquidations on exchanges hit $700 million during Tuesday’s crypto specific surge, with the highest levels for Ether and Bitcoin since May and July 2021 respectively, according to data from Genesis.

“On the surface, this appears to be a short squeeze, given the significant amount of liquidations across a number of venues; but there are encouraging signs that we may be stabilizing or even building towards a modest rally as we head into November,” said Steven McClurg, co-founder and chief investment officer at digital-asset fund manager Valkyrie Investments.

The lack of downward movement, at least, is a positive sign, said Michael Purves, founder of Tallbacken Capital Advisors. In October, the coin has kept above $19,000, although it has not posted the large gains typical for the start of the fourth quarter.

Others tried to keep the two-day rally in perspective, noting that most digital assets have dropped by more than 50% this year as central banks increased borrowing rates, lowering the appeal of riskier assets such as cryptocurrencies.

The recent narrow trading range could be a result of seller exhaustion. According to Purves, it’s possible that the majority of people who want to sell the token have already done so. “It could be showing signs of a bottom here,” said Purves.

For the token to break out of the doldrums, Purves said the digital asset will need new money, ideally from institutional investors. Unfortunately, he doesn’t see significant action on that front. “I think the bulls need to see a lot more,” he said.  

Dogecoin, the Shiba Inu meme coin that was initially launched as a joke in 2013, gained as much as 13% to around 7 cents. Tesla CEO Elon Musk, an ardent supporter of the token, pledged to close his acquisition of Twitter Inc. by Friday. Musk has talked about using cryptocurrency as a payment method for the social media platforms.   

--With assistance from Vildana Hajric.

©2022 Bloomberg L.P.