Bitcoin Gains Early, Fades Late to Trade Below $25K
By Jocelyn Yang
Buoyed by mildly encouraging inflation data and the banking sector’s continued rebound from near disaster, bitcoin rose above $26,000 on Tuesday for the first time in nine months before losing some of its gains.
The largest cryptocurrency by market capitalization was recently trading at $24,700, up over 2% in the past 24 hours. At one point on Tuesday, BTC had risen by double digits for a second consecutive day.
Bitcoin’s gains followed the Bureau of Labor Statistics release of the February Consumer Price Index (CPI), which showed inflation declining to 6% from January’s 6.4% reading. The core rate of inflation that strips out food and energy costs, increased by 0.5%, a tick up from January, and against forecasts for 0.4%, although the year-over-year core rate was down slightly from the previous month.
I think it was a healthy pullback after a euphoric crypto-specific rally,” Riyad Carey, research analyst at crypto data firm Kaiko, told CoinDesk in a direct message on Twitter. “I’m still surprised how quickly the market seems to have shrugged off the events of the weekend.”
Carey highlighted that markets are still illiquid, which “makes all these moves sharper.” Meanwhile, Tuesday’s news on a Russian fighter jet colliding with a U.S. Air Force drone over the Black Sea “added some jitters to all markets,” he added.
BTC’s surge this week followed U.S. banking and finance regulators’ decision to protect depositors of collapsed Silicon Valley (SIVB) and Signature Bank (SBNY), and reflected investor hopefulness that the U.S. central bank would reverse its current hawkish prescription for inflation in response to concerns that its oversteps had precipitated the near banking meltdown.
James Lavish, managing partner at Bitcoin Opportunity Fund, said that bitcoin’s pullback late Tuesday indicated that the cryptocurrency “got ahead of itself with short covering after pushing through key $25,000 resistance for traders.” In an email to CoinDesk, he added: “That, plus the CPI numbers suggest the hikes are not quite over yet, even if the 50-basis point is essentially off the table now.”
In the options market, traders have “priced in explosive upside moves for BTC” throughout 2023, said Greg Magadini, director of derivatives at crypto analytics firm Amberdata.
“Bitcoin has stopped trading as a ‘risk-asset’ and is instead now trading as an alternative currency as the Fed pivot narrative remains strong in the crypto community,” Magadini told CoinDesk in an email.
“Before SVB, the Fed had grown more hawkish due to strong employment numbers, with the downfall of SVB, we finally got a real ‘pivot’ catalyst,” he added.
Elsewhere in markets
Ether (ETH), the second-largest cryptocurrency, also surged in the morning but then retreated. ETH was recently changing hands at $1,705, up 1.5% for the day. LQTY, native token for decentralized borrowing protocol Liquity, was one of the big gainers Tuesday, up 10% amid renewedinterest in stablecoins post Circle USDC’s de-pegging.
The CoinDesk Market Index, which measures overall crypto market performance, was also up 2% for the day.
Equity markets rallied by Tuesday’s closing: The S&P 500 was up 1.6%, while the tech-heavy Nasdaq jumped 2.1%. The Dow Jones Industrial Average (DJIA) was up 1%.