Bitcoin’s price is up less than 1% to $28,600 in the last 24 hours, with the largest digital asset briefly surging above $29,100 in recent trade — the highest since last June, when the crypto crash unfolded brutal bear market accelerated. From around $16,500 earlier in the year, Bitcoin’s rally has sparked calls for a new bull market, with traders awaiting the green light at the psychologically important $30,000 level – where prices stood before June’s declines.
“The positive sentiment in the stock markets brought Bitcoin’s price back to the upper limit of the March trading range,” said Alex Kuptsikevich, an analyst at brokerage FxPro. “A potential upside target within the formation is near $35,000…however, Bitcoin could see short-term selling pressure as early as $30,000.”
In fact, bitcoin has rallied along with stocks, rising alongside the Dow Jones Industrial Average and the S&P 500 as investors shed fears of panic over the health of banks over the past few weeks and look to the inflation picture.
The macro backdrop — which correlates cryptos and stocks — remains key for Bitcoin as traders shrug off intense and mounting regulatory headwinds against digital assets to focus on the interest rate outlook. Higher interest rates are dampening demand for more risk-sensitive assets like cryptos. The Federal Reserve has been raising interest rates since last March in a bid to stem decades of inflation.
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Signs that inflation is cooling — coupled with concerns over the health of lenders, an unintended consequence of higher interest rates — have spurred bets that the Fed could be more accommodative on monetary policy and even cut rates soon, giving cryptos a boost.
Data in the coming days could confirm or shatter that narrative, as a third estimate of US gross domestic product (GDP) ahead of February’s personal consumption expenditure (PCE) index, which is the Fed’s favorite inflation measure, is due on Thursday.
“Investors appear to be positioning themselves and their books ahead of some key dates this week, namely GDP and PCE inflation data,” said James Lavish, managing partner of the Bitcoin Opportunity Fund.
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Bullish traders want both indicators to weaken, Lavish said. The logic is that a weaker economy, reflected in lower GDP pressures, could prompt the Fed to ease interest rate policy. Cooling PCE inflation could similarly lead to a dovish turn from the central bank and possibly market prices confirm that the Fed will hold rates on hold when its policy committee meets in early May.
But it’s not all risky.
“With the prospect of lagging effects from the rapid rate hikes that lie ahead, there is a significant possibility that we either have another credit-like event or are headed straight for a recession,” Lavish said. “Personally, I’m cautious about pricing here and only add opportunistically.”
Alongside bitcoin, ether — the second largest cryptocurrency — slipped 1% to $1,800. Smaller cryptos or altcoins were weaker, with both Cardano and Polygon down 2%. It was similar with Memeconis with Dogecoin and Shiba Inu
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2% drop.
Write to Jack Denton at [email protected]