Bitcoin (BTC) briefly tops $17,000 for the first time in two weeks
More than $1.3 trillion has been wiped from the cryptocurrency market so far in 2022 as the fallout from the FTX collapse continues to weigh on investor confidence.
CFOTO | Future Publishing | Getty Images
Bitcoin rose to a three-week high on Wednesday as investors continued to weigh the fallout from the collapse of cryptocurrency exchange FTX.
But one analyst warned that the rebound is likely just a bear market rally and will not be sustained.
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Bitcoin rose as high as $17,077.02, passing the $17,000 level or the first time in two weeks and hitting its highest level since Nov. 8, according to Coin Metrics.
The largest cryptocurrency by market capitalization fell below this level for much of the day on Wednesday, but recovered in the afternoon helped by comments from Federal Reserve Chairman Jerome Powell confirming that smaller rate hikes could start in December.
Other digital coins also rose, e.g etherwhich was last higher by about 5% at $1,290.97.
Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, said the upward move was likely the result of “congested shorts coverage.”
Someone who short an asset borrows some of that asset, sells it at a higher price and buys it back at a lower price and banks the profit from it. A short cover is when a trader buys the asset back at the lower price. That can cause the price of that asset to move higher.
Ayyar said the price of bitcoin has “hit resistance” at $17,000 and is likely to go lower from there.
“This is just a bearish retest,” Ayyar said.
Investor confidence in cryptocurrencies has been hammered after Sam Bankman-Fried’s exchange FTX collapsed and filed for bankruptcy this month, sending shockwaves throughout the industry.
Infection from the fallout spreads. Crypto lender and exchange BlockFi filed for bankruptcy as a result of exposure to FTX.
More than $1.3 trillion of value has been wiped from the cryptocurrency market this year, triggered by the failure of algorithmic stablecoin terraUSD in May and the implosion of hedge fund Three Arrows Capital. The FTX collapse has worsened the situation.
Traders will also be closely watching the content of a speech by US Federal Reserve Chairman Jay Powell at the Brookings Institution on Wednesday for clues about the central bank’s interest rate plans. If the market believes the Fed will slow the pace of interest rate hikes, it could give a boost to risk assets like stocks and bitcoin.
