The world’s largest cryptocurrency is down around 50% since the start of 2021.
CFOTO | Edition of the future | Getty Images
Bitcoin crossed the $24,000 threshold for the first time in more than a month as hopes of a less aggressive rate hike than feared by the Federal Reserve sparked a cryptocurrency relief rally.
The world’s largest cryptocurrency hit $24,047 on Wednesday, up more than 8% in 24 hours and trading at levels not seen since mid-June, according to data from Coin Metrics.
Traders were reassured by the prospect of looser policy action from the Fed at its next rate-setting meeting.
The effects of the US central bank’s monetary policy tightening weighed heavily on risky assets like stocks and crypto.
Bitcoin is still down around 50% since the start of 2021.
“It’s not necessarily the end of the crypto bear market, but a relief rally for Bitcoin is long overdue,” said Antoni Trenchev, CEO of crypto lender Nexo.
“Bitcoin is starting to find its footing after a shaky month, and the next week will be telling,” he added.
The US central bank is expected to raise rates again at its next policy meeting, but economists expect a less aggressive increase this time by 75 basis points instead of 100.
Cryptocurrencies have been touted as a source of value uncorrelated with traditional financial markets. But as institutional capital poured into digital assets, that thesis failed to materialize once the Fed started raising interest rates and traders fled equities.
A rally past $22,700 means the cryptocurrency has now recovered its 200-week moving average, laying the technical groundwork for a “trend reversal,” according to Yuya Hasegawa, crypto market analyst at the exchange. Japanese crypto Bitbank.
“The market needs a little more confidence to slow the pace of the Fed raising rates,” he said. “Nevertheless, the short-term outlook for bitcoin is optimistic and it could hit around $29,000 this week.”
Meanwhile, traders are betting that the worst of an intense market contagion caused by liquidity issues at some major crypto firms has likely subsided.
Digital currencies have come under immense selling pressure over the past couple of months as the collapse of some notable companies has caused ripple effects in the market. Terra, a so-called algorithmic stablecoin, plunged to near zero in May, setting off a chain of events that ultimately led to the bankruptcies of crypto firms Celsius, Three Arrows Capital and Voyager.
Elsewhere in crypto, ether soared nearly 5% to $1,609.06, while other so-called “altcoins” were also higher.
The second-largest token has risen more than 50% in the past seven days, fueled by optimism over a highly anticipated upgrade to its network known as “Merge”.
The developers now expect the update, which would move Ethereum away from environmentally dubious cryptocurrency mining to a more energy-efficient system, to be completed by September 19.
“Crypto 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 Ether transactions could be less damaging for the environment has sparked a flurry of interest,” said Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown.