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Cryptos are recovering after weeks of losses.
DreamstimeBitcoin led a rally in digital assets on Friday as cryptocurrency traders seemed to turn firmly bullish after weeks of prices under pressure.
The price of Bitcoin rose 5% over the past 24 hours to $21,500. The largest digital asset moved as high as $22,400 early Friday to trade at the highest levels since mid-June, when a painful crypto selloff accelerated.
“Bitcoin now has a little bit of upside potential,” wrote Yuya Hasegawa, an analyst at crypto exchange Bitbank, in a note.
While Bitcoin is sitting at less than one-third its all-time high near $69,000 reached in November 2021, it is comfortably above the key $20,000 level and has left its recent bottom below $18,000 far behind.
“An inherent resilience that cryptocurrency has displayed in recent weeks in the face of a wave of liquidations and solvency issues has come to the fore today,” a team of analysts at crypto exchange Bitfinex wrote in a note. “It will be interesting to see if a buoyant cryptocurrency market over the past 24 hours carries forward into more buying this month.”
There were gains across the crypto universe, with Ether gaining 3% to above $1,200—its highest level in weeks, even as the token underpinning the Ethereum blockchain network remains far below its November 2021 high near $4,900.
The rally was more muted among smaller cryptos, or altcoins, with Solana and Cardano hovering around flat. Memecoins—initially intended as internet jokes—were better, with Dogecoin inching 1% higher and Shiba Inu 3% into the green.
This rally will be welcome news to traders who have experienced volatile market conditions amid expectations that the digital asset space is heading into a new “crypto winter.”
Bitcoin just finished its worst quarter since 2011—a year in which its price crossed the $1 threshold for the first time—with the total market capitalization of cryptocurrencies collapsing from near $3 trillion eight months ago to $950 billion.
In addition to a broad market selloff, cracks in the crypto space itself have hurt digital asset prices—whether that be the meltdown of stablecoin Terra, failures at crypto lenders like Celsius and Voyager Digital, or pain felt from the bust of major hedge fund Three Arrows Capital.
Equities have managed to stage a turnaround this week, climbing steadily higher over the past four days.
But investors have yet to leave recession worries behind. Stocks were at risk of snapping their winning streak as the end of the week approached.
“This will not likely be a turning point from the macro perspective,” wrote Hasegawa. “The market is now all the more sensitive to economic data.”
Reports on Friday, including nonfarm payrolls and unemployment, may provide a catalyst. While labor data is generally a lagging indicator, signs of a slowdown might raise hopes that the Federal Reserve will become less aggressive.
Bitcoin derivatives traders appear bullish.
The aggregated open interest of Bitcoin futures is at the highest level since before the selloff in mid-June. This signals how much money is locked up into derivatives bets—typically with leverage, or borrowed money—as traders jockey for position before a big move.
Moreover, the funding rate for Bitcoin futures positions is consistently positive for the first time since mid-June, suggesting that traders have overwhelmingly taken bets that the price of the largest crypto will rise.
These signs are important for two reasons.
One, they are proof that sentiment among digital asset traders is brighter after weeks of a pervasive downbeat mood.
Two, they show that there is momentum behind a further rally, in part because more price gains would pressure short positions—or bets that Bitcoin will fall. Should cryptos keep climbing, traders that have bet on a decline may be forced to “cover” their positions by buying back Bitcoin, driving prices higher again.
“Hedge funds betting on wider contagion and market capitulation could be licking their wounds as Bitcoin and Ethereum both clock up impressive gains,” the Bitfinex analysts wrote.
Write to Jack Denton at [email protected]
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