The world’s largest cryptocurrency has fallen by about 50% since the start of 2021.
CFO | Future Publishing | Getty Images
bitcoin broke the $23,000 threshold for the first time in more than a month as hopes for a less aggressive than feared rate hike from the Federal Reserve sparked a crypto rally.
The world’s largest cryptocurrency surged to $23,800 on Wednesday, up 8% in 24 hours and trading at levels not seen since mid-June. According to Coin Metrics, it last traded at $23,330.80.
Traders were comforted by the prospect of softer Fed action at its next rate-setting meeting.
The effects of the U.S. central bank’s monetary tightening have hit risky assets like equities and cryptocurrencies hard.
Bitcoin is still down about 50% since the start of 2021.
“This is not necessarily the end of the crypto bear market, but a Bitcoin rally is long overdue,” said Antoni Trenchev, CEO of crypto lender Nexo.
“Bitcoin is starting to get back on its feet after a shaky month and next week will show that,” Trenchev said.
The US central bank is expected to raise rates again at its next policy meeting, but economists predict less aggressive increase this time by 75 base points, not 100.
Cryptocurrencies have been touted as a source of value unrelated to traditional financial markets. But as institutional capital poured into digital assets, that thesis fell flat when the Fed began raising interest rates and traders fled stocks.
According to Yui Hasegawa, a cryptocurrency market analyst at Japanese crypto exchange Bitbank, a rise above $22,700 means that the cryptocurrency has regained its 200-week moving average, laying the technical foundation for a “trend reversal.”
“The market needs a little more confidence in the Fed’s rate hike slowdown,” he said. “However, the short-term outlook for bitcoin is optimistic and could rise to $29K this week.”
Meanwhile, traders are betting that the worst of the intense market contagion fueled by liquidity issues at some major crypto firms is likely to verse.
Digital currencies have been under huge selling pressure in the past couple of months as the collapse of some well-known businesses has caused ripple effects in the market. Terra, the so-called algorithmic stablecoin, dropped to near zero in Maystarting a chain of events that eventually led to bankruptcy of crypto firms Celsius, Three Arrows and Voyager.
Elsewhere in crypto, ether rose more than 1% to $1,543.76, while other so-called “altcoins” were also higher.
The second largest token is up over 40% in the past seven days thanks to optimism about a long-awaited upgrade to its network, known as the “Confluence.”
Developers now expect the upgrade, which will take Ethereum from environmentally questionable crypto mining to a more energy efficient system, to be completed by September. 19.
“Cryptocurrency mining has been heavily criticized for contributing to climate change due to its energy-intensive nature, and as wildfires rage across Europe and the US, the promise that Ethereum transactions can be less disruptive to the environment has generated a wave of interest.” – the message says. Suzanne Streeter, Senior Investment and Markets Analyst at Hargreaves Lansdown.