Bitcoin
and other cryptocurrencies continued to rally, blowing out key price levels at the end of the week and spurring calls for a new bull market amid a macro backdrop that could favor cryptos over stocks.
The price of Bitcoin has risen 6% in the past 24 hours to nearly $26,175, returning to levels seen earlier this week and the highest point for the biggest digital asset since the crypto crash accelerated. in June. Bitcoin has surged more than 50% so far this year, and despite an earlier setback in March – which saw it fall back below $20,000 – was back on a bullish tear.
“From a technical standpoint, if Bitcoin could close above $26,000, it could signal the start of a bull market,” said Bitbank analyst Yuya Hasegawa.
Traders have shook off headwinds from the collapse of U.S. crypto-focused banks Silvergate and Signature Bank in recent weeks, even as those bank failures risk further regulatory pressures and negative impacts on market liquidity. digital assets. On the contrary, the pressure on banks – including the collapse of Silicon Valley Bank, the largest since the 2008-2009 financial crisis – which is an unintended consequence of the rapid rise in interest rates during the he past year has proven to be a tailwind.
The Federal Reserve has dramatically raised rates in an effort to rein in inflation, which has been high for decades, reducing demand for risk-sensitive assets like stocks and cryptos, and making Bitcoin closely correlated with the
Dow Jones Industrial Average
And
S&P500.
While traders had assumed the Fed would continue to raise rates in the face of continued rising prices, the pressure on banks spurred an about-face in expectations, with markets now pricing in much more accommodative monetary policy.
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“We are seeing more and more signs that the Fed will be forced to stop its tightening measures. A Fed reversal or pause will boost risk assets, including Bitcoin,” said Alex Thorn, head of research at digital asset group Galaxy. “We expect to see significant demand as Bitcoin breaks above $25,000.”
But that does not mean that cryptos and stocks will benefit from this trend. Some investors fear that as the impact of rising rates continues to be felt on the US economy – a process that can take several months – the risk of a slowdown to recessionary levels will increase. While this hurts corporate earnings and weighs on major stock indexes, Bitcoin could be more immune, especially if future expectations remain focused on a potential Fed reversal to a rate cut. Lower rates and simpler policy laid the groundwork for Bitcoin’s latest bull run.
“As the economy heads into a recession, the cryptoverse may look more attractive than stocks. It appears downside risks are greater for the S&P 500 than for Bitcoin,” said Edward Moya, an analyst at the Oanda broker.
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Crypto remains a high-risk asset – but this week bank stocks also fared similarly – with a long list of issues including the regulatory backdrop and dwindling investor interest amid the bear market . But there is at least one logical case for Bitcoin to outperform the stock market. If the rally can continue past $30,000 – where Bitcoin fell off a cliff last summer – this case could strengthen.
Beyond bitcoin,
Ether
—the second-largest crypto—advanced 3% to $1,720. Smaller cryptos or altcoins were also in the green, with
gimbal
up 2% and
Polygon
skip 4%. Memecoins featured much of the same, like
Dogecoin
jumped 5% and
shiba inus
gained 3%.
Write to Jack Denton at jack.denton@barrons.com