Bitcoin heads into best week since October as crypto crash stabilizes

The price of bitcoin crossed the $66,895 threshold for the first time in history in October.

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This week, the price of bitcoin jumped slightly as investors hoped the worst of the cryptocurrency liquidity crisis was over.

By Friday, Bitcoin was up about 11% on a weekly basis, posting its best week since October, according to Coin Metrics. At one point, the price surged to $22,478.37, rising from its June low of $17,000.

It last traded less than 1% higher intraday at $21,755.73 around 1:35 pm ET, according to CoinMetrics.

“Many insolvencies and forced winddowns are behind us in terms of volume,” said Felix Hartmann, managing partner at Hartmann Capital. “Three arrows filing for bankruptcy was sort of the last pin in it.”

Cryptocurrency-focused hedge fund Three Arrows has applied for bankruptcy last week after a sharp drop in digital currency prices revealed a liquidity crisis in the firm.

Hartmann added that market contagion could spread to smaller cryptocurrency exchanges or funds, but there were no bigger, more powerful dominoes left. According to him, if the crypto industry can go a month without bad news or insolvency, it is “very likely” that this market could double.

However, this will only push the price of bitcoin back to the April level. It is currently about 70% off its November all-time high of $68,982.20.

Looking for stability

Gritt Trakulhoun, lead crypto analyst at Titan, called bitcoin’s weekly rally a “badly needed” short-term relief rally following a major capitulation in May when Terra stablecoin project collapsed. Indeed, when digital currency prices fell and liquidity problems arose, crypto lenders as well as other firms also suffered.

Having an informal lender of last resort such as Sam Bankman-Fried to bail out some of the embattled crypto lenders also provides assistance to investors, Trakulhoun added. The FTX CEO said this week that he and his company still have “several billions” on hand. to support struggling firms this could further destabilize the digital asset industry.

Trakulhoun said $22,500 to $23,000 is a resistance level to watch for Bitcoin. If it exceeds that threshold, it should climb “pretty quickly” to the next stop: $28,000, he added.

Ryan Shea, an economist at Trakx, pointed to this week’s news that Federal Reserve officials said another interest rate hike 50 or 75 basis points probably at their July meeting. That, combined with growing signs that the US economy is slowing more than policymakers had predicted, is forcing investors to view the Fed’s aggressive stance “with more caution,” he said.

“Essentially, they are considering a raise and are instead focused on waiting for a possible capitulation by the Fed, which is a positive scenario for cryptocurrency prices and risky assets in general,” Shi said.