Bitcoin soars above $21,000 amid optimism over inflation
Cryptocurrency rose 7.5% to $21,299, before paring gains
Bitcoin surged over $21,000 yesterday amid optimism that it may have bottomed and inflation has peaked. The largest cryptocurrency rose as much as 7.5 per cent to $21,299, before paring gains as the day progressed. It hadn’t been above $20,000 since Nov. 8, and Saturday was the 11th straight day of advances. Second-largest token Ether surged as much as 9.7 per cent, and others such as Cardano and Dogecoin also notched gains. Solana soared as much as 35 per cent.
The overall market cap of the crypto universe rose above $1 trillion for the first time since early November, according to data from CoinGecko.
“There has been a steady grind higher since the start of the year,” said Cici Lu, chief executive officer of Venn Link Partners Pte. “It feels like we hit a supply ‘air pocket’ and breaking through $20,000 resistance took out some stops. Optically, $20,000 for many is a key level.”
Bigger-than-expected boost
US short-term inflation expectations fell in early January to the lowest in nearly two years, providing a bigger-thanexpected boost to consumer sentiment, according to the University of Michigan’s preliminary survey reading. A separate report showed consumer prices rising 6.5 per cent in the 12 months through December, marking the slowest inflation rate in more than a year.
The Federal Reserve is on track to downshift to smaller interest-rate increases following the further cooling in prices, though it’s likely to keep hiking until pressures show more definitive signs of slowing. That’s helped boost risk assets like the Nasdaq 100 stock index, which has gained for six straight days.
“Cryptoassets performed well following the soft CPI print, suggesting that crypto’s correlation to macro is not going away anytime soon,” said Sean Farrell, head of digital asset strategy at Fundstrat. “This week’s follow-through in price action is certainly encouraging,” and barring any forced liquidations from troubled crypto company DCG, “there is a high probability that the absolute bottom is in for crypto prices.”
The price of Bitcoin was stuck in a narrow range around $16,000 to $17,000 for weeks before the latest breakout. The upward moves have caught shorts by surprise “- crypto short liquidations have topped $100 million in five of the past six days, according to data from Coinglass. Saturday’s total was the highest, topping $449 million.
Caution on rally
Katie Stockton, co-founder of Fairlead Strategies, offered a caution about the rally, which has taken Bitcoin above its 200day moving average for the first time in a year.
“Deeply overbought shortterm readings challenge positive momentum, so we would not chase the rally at these levels,” she said in a note Friday. She sees resistance near $21,500, where there’s a 61 per cent Fibonacci retracement level.