Bitcoin (BTC) tops $20,000 in ‘bearish rally’ as US dollar falls
Bitcoin prices have been under pressure in 2022 following the collapse of algorithmic stablecoin terraUSD and subsequent bankruptcy filings by lender Celsius and hedge fund Three Arrows Capital.
Nicolas Economou | Nurphoto | Getty Images
Bitcoin rose 8% on Friday, breaking back above the $20,000 mark as the US dollar weakened and stocks jumped.
The world’s largest cryptocurrency was trading at $20,741.55 around 6 a.m. ET, after falling to its lowest level since mid-June earlier in the week.
related investment news
Other digital coins were higher including Ether which was up around 4%. The total cryptocurrency market capitalization jumped back above $1 trillion again.
The recent leg higher for bitcoin has been triggered by a slight weakening of the US dollar, which has seen a fantastic rally this year. The U.S. dollar index, which measures the greenback against a basket of other currencies, was down about 1% Friday morning.
US stock indexes closed higher on Thursday and futures were higher on Friday. Bitcoin has been closely correlated to US markets which often rise when stock indices do. Bitcoin also tends to rise when the dollar weakens.
Bitcoin has been trading in a range of around $18,000 to $24,000 since June and has failed to break that pattern.
Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, said Friday’s rally could be a “bearish retest” of the $22,500 to $23,000 price.
“Therefore, unless it breaks that level convincingly and closes above, I would still think this is a bearish rally that could see more distance and downside,” Ayyar said.
Bitcoin has been battered this year and is more than 60% lower than record highs set in November as the Federal Reserve has aggressively raised interest rates and taken the shine off risk assets like cryptocurrencies.
The crypto market has also been hit by failed projects and high-profile bankruptcies that have spread across the industry.
Ethereum ‘merges’, inflation in focus
Crypto markets have been waiting for a major network upgrade to Ethereum called the Merger, which proponents say will make the blockchain more efficient.
The merger is expected to be completed by mid-September.
Ahead of the event, the price of ether, the original token of Ethereum, has been far higher than bitcoin.
Financial markets are also looking for signs of cooling inflation when the US consumer price index is reported next week. And investors are also keeping an eye out for signals about the Fed’s rate hike path.
On Thursday, Fed Chairman Jerome Powell said he is “strongly committed” to fighting inflation, suggesting further rate hikes could be coming.
If inflation cools and with anticipation surrounding the Ethereum merger, Yuya Hasegawa, crypto market analyst at Japanese crypto exchange Bitbank, said bitcoin could test the $22,000 level, but also issued a warning.
“Given what some Fed members, including Chairman Powell, said this week, too much optimism can be dangerous,” Hasegawa said in a note Friday.
