Bitcoin increased by more than 5%, reaching its highest level since mid-September. Market participants will be watching for the Federal Reserve’s next statements.
Bitcoin surpassed $22,000 for the first time since mid-September, as the larger cryptocurrency market continued its surprise 2023 run.
The largest cryptocurrency by market capitalization was recently trading as high as $22,387, up 5.4% in the previous 24 hours, despite the late Thursday announcement that Genesis Global Holdco LLC, the holding company of troubled cryptocurrency lender Genesis Global Capital, had filed for Chapter 11 bankruptcy protection. (Digital Currency Group owns Genesis and CoinDesk.)
According to Edward Moya, senior market analyst at foreign exchange market maker Oanda, investors have factored in Genesis’ impending issues. The company has been caught up in the repercussions from the bankruptcies of crypto hedge fund Three Arrows Capital this spring and, more recently, crypto exchange giant FTX. Ether (ETH) has followed a similar trend, lately increasing 5.2% from the same time last Thursday to $1,640. The CoinDesk Market Index (CMI) was 4.1% higher.
BTC is up 11% in the last seven days and 34% for the year. ETH is up 12% in the last week and 37% since December 31.
Crypto-related companies profited from Friday’s increase as well: exchange Coinbase (COIN) recently gained 10%, while bitcoin miner Marathon Digital Holdings (MARA) gained 9%.
Traditional markets rose as well, with the S&P 500 index rising 1.9% as investors digested a flurry of mixed quarterly results from major banks.
The producer price index (PPI) fell more than predicted this week, indicating that the Federal Reserve’s monetary hawkishness has been curbing inflation, which has boosted investors. According to the CME FedWatch tool, traders currently anticipate a 97% chance that the Federal Open Market Committee (FOMC) will raise rates by only 25 basis points (0.25 percentage point) at its next meeting in February, a deceleration from the December meeting’s 50 basis-point hikes.
While recent macro data – “including a modest pullback in inflation, downwards-trending wage and employment data, and a seemingly weaker dollar” – have induced some market relief, Sheraz Ahmed, managing partner at STORM Partners, told CoinDesk that how the Fed handles monetary policy while balancing economic data and recession fears will have a big impact on the market overall.
“Post-rally elation is always a nice sensation, but it should be dealt with caution to avoid mistakes,” Ahmed remarked.
In a Friday note, Oanda’s Moya stated that if further tightening continues beyond the March meeting, “risky assets broadly, including crypto, could be subject to severe selling pressure.”