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Bitcoin and other cryptocurrencies continued to rally, breaking key price levels at the end of the week and fueling calls for a new bull market in cryptocurrency stocks.
Bitcoin's price has risen 7% in the past 24 hours to more than $26,500, surpassing a level set this week, the digital asset's biggest peak since the crypto crash accelerated last June. Bitcoin is up more than 50% this year and is back on the uptrend, despite seeing it drop below $20,000 earlier in March.
"Technically, if Bitcoin closes above $26,000, it could signal the start of a bull market," said Bitbank analyst Yuya Hasegawa.
Traders have dismissed the collapse of crypto-focused US banks in recent weeks, even as these bank failures risk further regulatory pressure and a negative impact on market liquidity. On the other hand, the pressures on banks, including the collapse of Silicon Valley Bank, the biggest since the 2008-2009 financial crisis, are an unintended consequence of the rapid rise in interest rates over the past year.
The Federal Reserve has raised interest rates sharply to curb decades-high inflation, reduce demand for risk-sensitive assets like stocks and cryptocurrencies, and to closely tie Bitcoin to the Dow Jones, Industrial Average and S&P 500 , the Fed is expected to raise interest rates. suggesting . . Then, the pressure on banks due to continued upward pressure on prices has led to a shift in expectations as markets now expect a much more accommodative monetary policy.
"We are seeing increasing signs that the Fed will need to stop tightening. A change or pause in the Fed will boost risk assets, including bitcoin," said Alex Thorne, director of research at digital assets group Galaxy. "We expect significant demand. If Bitcoin breaks above $25,000."
However, this does not mean that cryptocurrencies and stocks will benefit from this trend. Some investors fear that if the impact of rising interest rates on the US economy continues to be felt, the risk of a slowdown in the recession, which could last several months, will increase. While this hurts corporate earnings and boosts the major stock indexes, Bitcoin could be more resilient, especially if future expectations continue to focus on a potential reversal of the Fed's rate cuts. Low interest rates and easier policy set the stage for bitcoin's recent rally.
"If the economy is headed for a recession, cryptocurrencies may be more attractive than stocks. The downside risks of the S&P 500 seem to be greater than those of Bitcoin," said Edward Moya, an analyst at brokerage Oanda.
Crypto remains a risky asset, but banking stocks have performed similarly amid a long list of issues this week, including a regulatory backdrop and waning investor interest in the bear market. But there is at least one logical case for Bitcoin to beat the stock market. If the rally can cross $30,000, where Bitcoin fell off the cliff last summer, it could intensify this fall.
At the moment, the technical chart looks positive.
"Bitcoin breaks resistance above the trading range near $25,2000 with near-term momentum," wrote Cathy Stockton, managing director of technical research firm Fairlead Strategies. "A breakout should "close" consecutive weeks (this Sunday and next Sunday) above resistance and the end of the base phase of the long-term uptrend." The next resistance is the area around $27,300-$28,200.
Along with Bitcoin, Ether , the second largest cryptocurrency, rose 5% to around $1,750. Smaller cryptos or altcoins were also in the green, with Cardano up 3% and Polygon up 4%. Memecoins were similar, with Dogecoin up 5% and Shiba Inu up 3%.
Email Jack Denton at jack.denton@barrons.com