Bitcoin Traders rose further over the weekend as they bet on the Federal Reserve’s “pivot” to cut rates after news of another cryptocurrency bankruptcy.
According to CoinGecko data, the price of the #1 token briefly crossed $23,000 for the first time since August 19, 2022. It then dropped slightly to $22,859.20. The jump has pushed Bitcoin up almost 39% since the beginning of January.
Ether, the second largest digital coin, rose to $1,664.78 on Saturday. This is the first time he has crossed $1,600 since November 7, 2022. As of 6:40 am ET, Ether was worth $1,639.30.
Bitcoin kicks off 2023 positively, with investors hoping for a reversal of the monetary tightening that rocked market players last year.
The Fed and other central banks will begin cutting rates in 2022, shocking holders of riskier asset classes such as equities and digital tokens. Publicly traded technology stocks and private venture capital-backed startups were particularly hard hit as investors sought protection for assets deemed safer, such as cash and bonds.
With inflation now showing signs of abating in the United States, some market players are hoping the central bank will slow down or even begin cutting rates. Economists previously told CNBC they expected a Fed rate cut as early as this year.
Charles Hayter, CEO of crypto data site CryptoCompare, said in an emailed comment to CNBC that “the Fed tightening appears to be easing and the risks of inflation appear to be low.” said. We expect the world to be cautious about rate hikes.”
The Federal Reserve is likely to keep interest rates high for the foreseeable future. I’m looking for
Bitcoin, the world’s premier digital currency, “looks increasingly like it’s bottomed out,” said Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno.
According to Ayyar, bitcoin short sellers have been weighed down by the sudden rise in price. Shorting is an investment strategy in which a trader borrows an asset and sells it in the hope that it will fall in value.
Ayyar said the cleanup of these short positions caused by the rising Bitcoin price is “adding fuel to the fire”.
What kind of cryptocurrency?
Investors seem largely unperturbed by the bankruptcies of major cryptocurrency companies following the collapse of digital currency exchange FTX in November.
Last week, the lending arm of New York-based cryptocurrency investment firm Genesis The latest victim of the cryptocurrency crisis seeking bankruptcy protection with a “mega” filing listing $1.2 billion to $11 billion in total debt.
“The Genesis debacle has been going on for a while and may already be priced in. Meanwhile, FTX has already had a major impact on many investors, market psychology, and the price of some toxic assets. ,” said Mati Greenspan. , the founder and CEO of crypto investment advisory firm Quantum Economics, told CNBC.
“But it should be noted that Bitcoin itself has a very limited price as FTX had nothing on its balance sheet.”
Despite the recent surge, Bitcoin is about 67% away from all-time highs.
The recent cryptocurrency crash differs from past cycles, largely due to the role leverage played. Major cryptocurrency players have been caught in risky lending practices, currently offering high yields that many investors say are unsustainable.
This started with the collapse of terraUSD (or UST) in May. This is an algorithmic stablecoin that was supposed to be pegged 1:1 with the US dollar. The failure of UST brought terraUSD’s sister token luna down, hitting companies exposed to both tokens.
Hedge fund Three Arrows Capital, which is bullish on cryptocurrencies, has gone into liquidation due to its exposure to Tera USD.
Then FTX, one of the world’s largest cryptocurrency exchanges, went bankrupt in November. It was run by Sam Bankman-Fried, an executive who was often in the spotlight.
The influence from FTX continues to ripple through the cryptocurrency industry. Since the peak of the cryptocurrency boom in November 2021, a severe recession known as “cryptocurrency winter” has wiped nearly $2 trillion in value from the entire cryptocurrency market.
One analyst warned that technical indicators suggest there may be a pullback from the token’s recent rally.
Yuya Hasegawa, a crypto market analyst at Japanese bitcoin exchange Bitbank, said that while Bitcoin’s trend indicator “generally shows a strong upward trend,” it is an indicator of its relative strength. The RSI has “deviated from the upward trend of the price and started to fall. This is not a good sign for the current price trend.”
“Bitcoin may test August highs and find support at $20,000 to $21,000 levels, but RSI divergence and some big tech hits this week,” Hagesawa said in a note on Monday. Earnings can be very volatile,” he said.
Nonetheless, with the recent rise in Bitcoin prices, some investors are hopeful that the ice may be beginning to melt.
Greenspan said Bitcoin’s rally moment is typical of cryptocurrencies as investors anticipate the next so-called “halving” event, a change in the Bitcoin network that cuts rewards to miners by half. Some investors see it as positive for the price of the token as it squeezes supply.
The next halving is scheduled between March and May 2024.