• Bitcoin topped $17,000 to trade at its highest level since Nov. 8 before paring gains.
• One analyst warned that the bounce is likely just a bear market rally and would not be sustained.
• Investor confidence in cryptocurrencies has been hammered after Sam Bankman-Fried's exchange FTX collapsed and filed for bankruptcy this month, sending shockwaves through the entire industry.

Bitcoin on Wednesday rose to a three-week high as investors continued to weigh the fallout from the collapse of cryptocurrency exchange FTX.

But one analyst warned that the bounce is likely just a bear market rally and would not be sustained.

Bitcoin rose as high as $17,077.02, passing the $17,000 level or the first time in two weeks and touching its highest level since Nov. 8, according to Coin Metrics.

The largest cryptocurrency by market cap fell below that level for much of the day Wednesday but recovered in the afternoon with help from Federal Reserve Chair Jerome Powell's comments confirming smaller interest rate hikes could start in December.

Other digital coins also rose, including ether, which was last higher by about 5% at $1,290.97.

Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, said the move higher was likely a result of "over leveraged shorts covering."

Someone who shorts an asset borrows some of that asset, sells it at a higher price then buys it back at a lower price and banks the profit from that. A short covering is when a trader buys the asset back at the lower price. That can cause the price of that asset to move higher.

Ayyar said the price of bitcoin has "hit resistance" at $17,000 and is likely to go lower from there.

"This is just a bearish retest," Ayyar said.

Investor confidence in cryptocurrencies has been hammered after Sam Bankman-Fried's exchange FTX collapsed and filed for bankruptcy this month, sending shockwaves through the entire industry.

Contagion from the fallout is spreading. Crypto lender and exchange BlockFi filed for bankruptcy as a result of exposure to FTX.

More than $1.3 trillion of value has been wiped off the cryptocurrency market this year, sparked by the failure of the algorithmic stablecoin terraUSD in May and implosion of hedge fund Three Arrows Capital. The FTX collapse has worsened the situation.

Traders will also be closely watching the contents of a speech by U.S. Federal Reserve Chair Jay Powell at the Brookings Institution on Wednesday for clues about the central bank's interest rate plans. If the market thinks the Fed will slow the pace of rate hikes, it could give a boost to risk assets such as stocks and bitcoin.