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bitcoin on Thursday it surged to its highest price in nearly a month as traders bet on a cooling of US inflation and digesting news that lawyers for defunct crypto exchange FTX found billions of dollars in assets.
The world’s largest digital currency surged above $18,000 for the first time since Dec. 14 on Wednesday night, rising in value by around 5% over the last 24 hours. Bitcoin was trading at $18,154.35 at 5am Thursday morning, according to data from CoinMetrics.
On Wednesday, lawyers for bankrupt crypto exchange FTX said they had found about $5 billion in “liquid” assets, including cash and digital assets. The recovery will be a welcome boon for FTX customers following the cryptocurrency exchange’s implosion in November.
FTX’s lawyers, however, warned that the $5 billion cache was so high that the sale of the assets could lead to significant downward pressure on the market, reducing its value.
“Bitcoin has been in a downtrend for over a year, which is a standard period of a crypto bear market,” Vijay Ayyar, vice president of international and corporate development at crypto exchange Luno, told CNBC in comments by email on Thursday morning.
“We’ve had a lot of negative events going on in the last year, and if you look at the price reaction to those events, overall it’s been falling less and less – an indication that the market is taking the news very well, selling pressure is being absorbed. and therefore we are moving into an accumulation stage,” he added. “It could also mean that the market thinks the worst is over for cryptocurrencies and the most negative news is already priced in.”
US inflation data to be released on Thursday is expected to show a slowdown in inflation. Economists polled by Dow Jones anticipate that the consumer price index fell 0.1% month-on-month in December.
Inflation is still expected to rise 6.5% year-on-year, although that is down from a 7.1% jump in November and well below a peak rate of 9.1% in June. Investors are hoping the decline could put pressure on the US Federal Reserve to reverse interest rate hikes.
The Fed and other central banks have raised interest rates over the past year in an effort to tame rising inflation — in moves that have forced stocks and cryptocurrencies to fall sharply in 2022.
The hope now is that the central bank will cut rates, taking some of the pressure off risky assets.
“Today’s CPI numbers could be quite revealing, and a hot CPI print could definitely throw a wrench in the works for risky assets like crypto,” Ayyar said.
This or other negative crypto news could see bitcoin price drop below $17,000, warned Ayyar, setting the stage for further declines and a potential drop for the digital asset within a $12,000-$14,000 range. .
Bitcoin is down about 74% from its November 2021 all-time high of $68,990. Last year, nearly $1.4 trillion in value was wiped out of the cryptocurrency market as traders dumped risky assets such as technology and growth stocks.
Bitcoin and the wider digital currency market also dropped, suggesting a growing correlation with major equity benchmarks such as the Nasdaq Composite.
The drop was also caused by crypto-specific issues, including the collapse of projects and companies like FTX and Terra.
However, Bitcoin started 2023 on a positive basis, with its price rising steadily over the past 12 days.
Other digital currencies were boosted by the jump in bitcoin prices on Thursday. Ether, the second-largest coin, was up nearly 5% to $1,397.78, while Binance’s BNB token was up 3% to $283.
Changpeng Zhao, CEO of Binance, told CNBC on Wednesday that the exchange plans to increase hiring by 15% to 30% in 2023, in contrast to other exchanges that have cut jobs.
Binance, which previously earmarked $1 billion for a fund meant to prop up the sector after the FTX collapse, has been plagued by fears about the soundness of its reserves. The auditor working on the company’s so-called proof of reserves, Mazars, stopped all work with cryptocurrency companies in December.
Binance says it has more than enough assets to cover liabilities.
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