Bitcoin (BTC) price rises to top $20,000 even as stocks hit 2022 lows

Bitcoin topped $20,000 on Tuesday, hitting its highest level in more than a week, but is still struggling to break out of the tight trading range.

The world’s largest cryptocurrency was more than 7% higher at $20,265.95 around 3:30 a.m. ET, according to data from CoinDesk.

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Bitcoin’s rally lifted the broader cryptocurrency market. Ether was up around 7% at $1,389.75.

Still, bitcoin has struggled for direction, trading between $18,000 and $25,000 since mid-June after a crash that saw nearly $2 trillion wipe out the entire crypto market since its peak in November.

This market decline was fueled by interest rate hikes by central banks aimed at controlling rampant inflation as well as a wave of bankruptcies and insolvency issues filtering through the crypto industry.

Crypto investors have been watching monetary policy because digital currencies have been closely correlated to US stock markets this year. Higher interest rates have put pressure on the S&P 500 and tech-heavy Nasdaq, which has filtered through other risky assets including cryptocurrencies.

The US Federal Reserve’s 0.75 percentage point interest rate hike last week marked a “major event” for crypto markets, according to Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno.

“This was broadly in line with market expectations and so we’ve seen a lot of that sentiment priced in,” Ayyar said.

Interestingly, bitcoin’s rally, which began on Monday, occurred despite a fall in US stocks with the S&P 500 closing at its lowest level in 2022. Stock futures rose on Tuesday. So there are signs that perhaps the correlation between crypto and stocks may weaken.

Meanwhile, investors are keeping a close eye on the US dollar. The dollar index, which tracks the greenback against a basket of currencies, is up more than 18% this year. Bitcoin moves inversely to the dollar, so a strong dollar is negative for bitcoin. However, Ayyar said the dollar index could be nearing a top, which would mark a potential bottom for bitcoin. That could be a reason behind bitcoin’s rise.

“Traders can therefore also position themselves accordingly,” said Ayyar.