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Bitcoin on Thursday surged to its highest price in nearly a month, as traders bet on an U.S. inflation cooldown and digest news that lawyers for defunct crypto exchange FTX found billions of dollars’ price of assets, boosting hopes for its users.
The world’s largest digital currency climbed above $18,000 for the primary time since Dec. 14 late Wednesday, increasing in value by about 5% within the last 24 hours. Bitcoin was trading at $18,164.80 as of 02:30 ET Thursday morning, in line with CoinMetrics data.
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On Wednesday, attorneys for collapsed crypto exchange FTX said they’d found around $5 billion in “liquid” assets, including money and digital assets. The recovery shall be a welcome boon to FTX customers after the crypto exchange imploded in November.
FTX lawyers nevertheless warned the $5 billion cache was so high that selling the assets could lead on to significant downside pressure available on the market, driving down their value.
“Bitcoin has been in a downtrend for over a yr now, which is a typical period of a bear market in crypto,” Vijay Ayyar, vice chairman of corporate development and international at crypto exchange Luno, told CNBC in emailed comments Thursday morning.
“We have had many negative events transpire over the past yr, and if one looks at the value response to those events, usually it has been declining less and fewer — a sign that the market is accepting the news quite well, sell pressure is being absorbed, and hence we’re moving to an accumulation stage,” he added. “This might also mean that the market thinks the worst is over for crypto and that the majority negative news in now priced in.”
U.S. inflation data due out Thursday is forecast to point out a softening of inflation. Economists polled by Dow Jones anticipate that the buyer price index declined 0.1% month-on-month in December.
Inflation remains to be expected to rise 6.5% year-over-year, though this could be down from a 7.1% jump in November and well off a 9.1% peak rate in June. Investors hope the decline may put pressure on the U.S. Federal Reserve to reverse rate of interest increases.
The Fed and other central banks have been raising rates of interest over the past yr or so in an effort to tame soaring inflation — in moves that forced stocks and cryptocurrencies sharply lower in 2022.
The hope now could be that the central bank will cut rates, taking some pressure off risk assets.
“Today’s CPI numbers may very well be quite telling, and a hot CPI print could definitely throw a spanner within the works for risk-on assets comparable to crypto,” Ayyar said.
That or further negative news in crypto may cause the value of bitcoin to slide below $17,000, Ayyar warned, setting the stage for added declines and a possible fall of the digital asset inside a $12,000 to $14,000 range.
Bitcoin is down about 74% from its November 2021 all-time high of $68,990. Last yr, nearly $1.4 trillion of value was wiped off the cryptocurrency market, as traders dumped dangerous assets like technology and growth stocks.
Bitcoin and the broader digital currency market also slumped, suggesting increasing correlation with major stock benchmarks just like the Nasdaq Composite.
The plunge was also brought on by crypto-specific issues, including the collapses of projects and corporations like FTX and Terra.
Other digital currencies were buoyed by the jump in bitcoin prices Thursday. Ether, the second-largest coin, rose 5% to $1,401.18 while Binance’s BNB token rose 3% to $285.37.
Changpeng Zhao, the CEO of Binance, told CNBC Wednesday that the exchange plans to extend hiring by 15% to 30% in 2023, in stark contrast with other exchanges which have cut jobs.
Binancey, which earlier earmarked $1 billion for a fund geared toward propping up the industry after the collapse of FTX, has itself been beset by fears over the soundness of its reserves. The auditor working on the corporate’s so-called proof of reserves, Mazars, paused all work with crypto corporations in December.
Binance says it has good enough assets to cover liabilities.
