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Bitcoin prices have advanced this week.
DreamstimeBitcoin prices have consolidated above a key level as most cryptocurrencies rose on Thursday, helped along by slow but steady gains in the stock market.
The price of Bitcoin rose 2% over the past 24 hours to above $20,500, having reclaimed the $20,000 mark on Wednesday after falling through it a week ago. The largest digital asset is trading at less than one-third its all-time high near $69,000, reached in November 2021, but is now well above its $18,000 bottom that was hit during the trough of a selloff in mid-June.
“Bitcoin has clung to the $20,500 region, although it can probably thank its Nasdaq correlation for that,” wrote Jeffrey Halley, an analyst at broker Oanda. “Despite more credit implosions in the crypto space as the reality of concentration risk in a lending portfolio hits home.”
Indeed, crypto holders can thank upbeat action in the stock market for the recent gain in digital assets. While they should theoretically trade independently of mainstream finance, Bitcoin and its peers have shown over the past year to be correlated to stocks, and especially tech stocks.
For the most part, this correlation has been painful. The S&P 500 and tech stock-heavy Nasdaq are both in a bear market as investors fret over the risk of recession amid a dramatic rise in interest rates by the Federal Reserve—an environment that isn’t supportive of risky bets like Bitcoin.
But stocks have reversed course, rising slowly but steadily in the face of continued recession worries since investors have returned from the July 4 long weekend. And that should help cryptos.
Certainly, cryptos are not helping themselves. Exacerbating the digital asset rout—which just saw Bitcoin notch its worst quarter since 2011, a year in which it broke the $1 barrier for the first time—have been a number of high-profile failures in the crypto space. Cracks in the industry include the meltdown of stablecoin Terra, breakdowns at lenders including Celsius, Vauld, and Voyager Digital , and the bust of a major hedge fund that threatens wider contagion.
Beyond Bitcoin, much of the digital asset space was buoyed. Ether, the second-largest crypto, gained 3.5% to $1,200. Smaller tokens, or altcoins, also rose, with Solana and Cardano both up 2%. Memecoins—initially intended as internet jokes—were similarly higher as Dogecoin and Shiba Inu ticked up 2%.
However, “negative sentiment remains among market participants,” wrote Marcus Sotiriou, an analyst at digital asset broker GlobalBlock in a Wednesday note.
Sotiriou said that digital asset manager CoinShares reported inflows of $51 million into a new short Bitcoin strategy—just one week after institutional investors withdrew $423 million from crypto-focused funds.
“This is a result of the current uncertainty with the macro environment, as risks of a recession worsen,” the analyst wrote. “Institutions are bearish on the asset.”
Write to Jack Denton at [email protected]
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