(Bloomberg) — Bitcoin rose above $21,000 on Saturday amid hopes that it may have bottomed and inflation may have peaked.
Most Read from Bloomberg
The largest cryptocurrency rose as much as 7.5% to $21,299 before the day progressed. It hasn’t topped $20,000 since Nov. 8, and advanced for an 11th straight day on Saturday. The second largest token, Ether, rose as much as 9.7%, and others such as Cardano and Tocoin also made gains. Solana rose to 35%.
According to data from CoinGecko, the overall market cap of the crypto universe has topped $1 trillion for the first time since early November.
“There has been a steady grind higher since the beginning of the year,” said CC Lu, chief executive officer of Wen Link Partners Pte. “We feel like we hit a supply ‘air pocket’ and broke the $20,000 resistance and took some stops. Optically, $20,000 is a milestone for many people.
U.S. short-term inflation expectations fell to a nearly two-year low in early January, giving a bigger-than-expected boost to consumer sentiment, according to a preliminary survey reading from the University of Michigan. A separate report showed consumer prices rose 6.5% in the 12 months to December, marking the slowest rate of inflation in more than a year.
The Federal Reserve is on track to cut interest-rate hikes to small interest-rate hikes following further cooling in rates, although it is likely to continue hiking until pressures show tangible signs of easing. That helped boost risk assets such as the Nasdaq 100 stock index, which gained for six consecutive days.
“Cryptoassets have performed well following a softer CPI axis, suggesting crypto’s correlation to the macro is not going away anytime soon,” said Sean Farrell, head of digital asset strategy at Fundstrat. “This week’s price action is certainly encouraging,” and barring any forced liquidations from troubled crypto firm DCG, “a complete bottom in crypto prices is highly likely.”
Bitcoin price was stuck in a narrow range of $16,000 to $17,000 for weeks before the recent breakout. The upward moves have surprised shorts — crypto short liquidations have topped $100 million in five of the last six days, according to data from Coinglass. Saturday’s total rose to $449 million.
Katie Stockton, co-founder of Fairlead Strategies, issued a warning about the rally, which has taken Bitcoin above its 200-day moving average for the first time in over a year.
“Deeply bought short-term metrics are challenging positive momentum, so we won’t be chasing a rally at these levels,” he said in a note on Friday. He sees resistance near $21,500, where the 61% Fibonacci retracement level lies.
However, in a market that has struggled to find good news in recent months, the upward trajectory could inspire more optimism.
“A drop in the CPI and the announcement that FTX liquidators have recovered $5 billion in liquid assets has given crypto markets plenty of reasons to forget the macro picture, which is still bearish,” said Hayden Hughes, CEO of social trading platform Alpha. Impact. “There is plenty of positive momentum in the markets heading into the next FOMC meeting later this month.”
Most read from Bloomberg Businessweek
©2023 Bloomberg LP