Bitcoin surged as investors bet it was low and inflation was rising

Bitcoin surged to $21,000 on Saturday amid optimism that it will bottom out and inflation has picked up.

The biggest cryptocurrency rose 7.5% to $21,299, before extending gains as the day wore on. It hasn’t been above $20,000 since Nov. 8, and Saturday was the 11th consecutive day of improvement. The second largest token Ether surged 9.7%, and others such as Cardano and Dogecoin also made gains. Solana surged up to 35%.

The total market cap of the crypto universe rose above $1 trillion for the first time since early November, according to data from CoinGecko.

“There has been a steady grind higher since the beginning of the year,” said Cici Lu, chief executive officer of Venn Link Partners Pte. “It looks like we’ve hit a supply ‘air pocket’ and the break through the $20,000 resistance has stopped. In fact, $20,000 is for many a significant level. ”

US short-term inflation expectations fell in early January to the lowest in nearly two years, giving a bigger-than-expected improvement in consumer sentiment, according to a preliminary survey by the University of Michigan. A separate report showed consumer prices rose 6.5% in the 12 months to December, marking the slowest inflation rate in more than a year.

The Federal Reserve is on track to downshift to smaller interest-rate hikes after further cooling of rates, although it is likely to continue hiking until pressures show more certainty. signs of slowing down. That helps boost risk assets like Nasdaq 100 stock index, which has gained for six consecutive days.

“Cryptoassets performed well following the mild CPI print, suggesting that crypto’s correlation with the macro is not going away anytime soon,” said Sean Farrell, head of digital asset strategy at Fundstrat. “This week’s follow-through on price action is certainly encouraging,” and barring any forced liquidation troubled crypto company DCG“there is a high possibility that the absolute bottom for crypto prices.”

Bitcoin price was stuck in a narrow range around $16,000 to $17,000 for weeks before the latest breakout. The upward moves caught shorts by surprise — short crypto liquidations topped $100 million in five of the past six days, according to data from Coinglass. Saturday’s total was the highest ever, topping $449 million.

Katie Stockton, co-founder of Fairlead Strategies, offered a warning about the rally, which took Bitcoin above its 200-day moving average for the first time in a year.

“Deeply overbought short readings challenge the positive momentum, so we will not chase the rally to this level,” he said in a note on Friday. He sees resistance near $21,500, where there is a 61% Fibonacci retracement level.

However, the upward trajectory could inject more optimism into a market that has struggled to find good news in recent months.

“The decrease in the CPI was accompanied by the announcement that the FTX liquidators recovered $5 billion in liquid assets gives the crypto markets a lot to overlook the macro picture, which is still bearish,” said Hayden Hughes, chief executive officer of social-trading platform Alpha Impact. “Markets have a lot of positive momentum heading into the next FOMC meeting later this month.”

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