Bitcoin rises to $26k as traders bet on a crypto comeback

Bitcoin rises to k as traders bet on a crypto comeback

Bitcoin soared above $26,000 following the release of a key inflation report on Tuesday morning, posting a larger 18% gain over a 24-hour period as traders bet on a cryptocurrency comeback.

Ether (ETH-USD), the second largest cryptocurrency, also rose more than 10% in the same period as smaller cryptocurrencies Dogecoin (DOGE USD), Polygon (MATIC USD) and Polkadot (DOT-USD). Everyone gave up some of their winnings at noon; Bitcoin is currently trading at $26,000 as of 12 EST.

The turnaround in the crypto market coincides with new signs that inflation is cooling and government efforts to stabilize the banking system following the failures of Silicon Valley Bank, a lender to tech firms, and Signature Bank, which catered to the cryptocurrency industry. US officials announced a series of measures on Sunday evening to deal with the banking crisis, including a plan to ensure that all depositors in failed banks get their money back. Another bank that served crypto customers, Silvergate Bank, also decided to liquidate last week.

The collapse of these banks caused concern in the cryptocurrency world due to certain exposures to these institutions. The second largest stablecoin, USDC (USDC-USD), fell below the crucial $1 peg on Friday to a low of 88 cents on Saturday morning, as the latest “transparency report” for the digital coin showed issuer Circle holding $3.3 billion of its cash holdings at Silicon Valley Bank.

“Bitcoin is getting a bid of relief that appears to be driven in part by general risk-on sentiment following the bailouts of Silicon Valley Bank and Signature Bank,” Ben McMillan, chief investment officer at asset manager IDX, told Yahoo Finance.

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A security guard stands outside the entrance to the Silicon Valley Bank headquarters in Santa Clara, California, U.S. March 13, 2023. REUTERS/Brittany Hosea-Small

A security guard stands outside the entrance to the Silicon Valley Bank headquarters in Santa Clara, California, U.S. March 13, 2023. REUTERS/Brittany Hosea-Small

Today’s rise was helped by an announcement that headline inflation for February’s consumer price index came in line with analysts’ expectations, rising 0.4% in the latest month and 6% year-on-year in February. However, core inflation prices increased by 0.5% despite expectations of 0.4%. The 6% jump in inflation marks the slowest annual increase in consumer prices since September 2021.

Bitcoin (BTC-USD) and other major digital coins also attracted higher flows on Monday after Binance founder and CEO Changpeng Zhao announced his firm, the world’s largest cryptocurrency exchange, would convert $1 billion in funds from the defunct stablecoin Binance USD into “BTC, BNB and ETH.” The total market capitalization of cryptoassets rose 12% over a 24-hour period to $1.14 trillion, according to Coinmarketcap.

The crypto ecosystem continues to be “the highest risk part of the market” according to Matthew Miskin, chief investment officer at John Hancock Investment Management. Miskin told Yahoo Finance that his firm believes bitcoin’s Tuesday rally “masks underlying risks” associated with recent bank shutdowns.

Edward Moya, senior market analyst at Oanda, told Yahoo Finance that he is skeptical that bitcoin’s rally can last, calling Tuesday’s move an “overreaction to inflation data.”

Several traders and firms began betting on a comeback last weekend, as crypto values ​​fell.

“There were some arbitrage opportunities around USDC and other stablecoins like Tether that traders in the market poured into,” Michael Safai, co-founder and partner of trading firm Dexterity Capital, told Yahoo Finance.

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Safai said his firm was one of many that entered the trading game USDC would not fail even though it was part of the firm’s regular “day-to-day trading strategies.”

On Saturday, 38-year-old Doğu Tekinoğlu exchanged $8 million of stablecoin USDT for the discounted USD coin, according to blockchain data verified by Yahoo Finance. It paid off after Circle said Saturday it would cover any lost deposits from Silicon Valley Bank and regulators said Sunday all depositors would get their money back. The stablecoin has since climbed above 99 cents per coin.

Tekinoğlu said his purchases have made a profit. “Of course, none of it is 100% guaranteed, but that’s life in crypto. Turn pure speculation into profit,” Tekinoğlu told Yahoo Finance.

David Hollerith is a reporter for Yahoo Finance. Follow him on Twitter @DSHollers

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