On Saturday, Bitcoin surged over $21,000 amid optimism among investors that the token may have touched its bottom, and inflation may have peaked.
The world’s first and largest cryptocurrency rose 7.5%, to $21,299 per token. Bitcoin has not risen above $20,000 since November 8th, with Saturday marking the 11th straight day the token advanced.
Ether, the second-largest cryptocurrency, surged 9.7% as other cryptos like Cardano and Dogecoin also rode the wave of investor optimism, logging gains. Overall, the total market capitalization of the crypto sector rose above $1 trillion according to data from Coingecko. It was the first time the sector’s total market capitalization had risen above $1 trillion since November.
The surge in crypto came amid the Consumer Price Index report last week, which showed inflation had declined in January from December levels. The Federal Reserve had already been shifting toward smaller interest rate hikes as the central bank approached its peak rate and the economy began to show signs of cooling. Although the CPI report offered further evidence of a cooling economy, the Federal Reserve is likely to continue raising rates until more definitive evidence of a slowdown in the jobs market begins to present itself.
Sean Farrell, head of digital asset strategy at Fundstrat said, “Cryptoassets performed well following the soft CPI print, suggesting that crypto’s correlation to macro is not going away anytime soon. This week’s follow-through in price action is certainly encouraging,” and barring any forced liquidations from troubled crypto company DCG “there is a high probability that the absolute bottom is in for crypto prices.”
Bitcoins price had been hovering within a narrow range of about $16,000-$17,000 for weeks prior to the latest surge. As the token moved upward suddenly, shorts were caught by surprise, as short liquidations rose above $100 million in five out of the past six days. Saturday the total reached its highest level, rising above $296 million.
Hayden Hughes, chief executive officer of Alpha Impact, a social-trading platform, said, “Declining CPI coupled with the announcement that the FTX liquidators have recovered $5 billion in liquid assets have given crypto markets plenty of factors to forget the macro picture, which is still bearish. Markets have plenty of positive momentum heading into the next FOMC meeting later this month.”
