Bitcoin (BTC) climbs above $23,000

Bitcoin breached the $23,000 threshold for the first time in more than a month as hopes of a less aggressive than feared Federal Reserve rate hike sparked a relief rally in cryptocurrencies.

The world’s largest cryptocurrency soared as high as $23,800 on Wednesday, up 8% in 24 hours and trading at levels not seen since mid-June. It last traded at a price of $23,330.80, according to Coin Metrics data.

Traders took comfort in the prospect of softer policy action from the Fed at its next rate meeting. The effects of tighter monetary policy from the US central bank have weighed heavily on risky assets such as stocks and crypto.

“This is not necessarily the end of the crypto bear market, but a relief rally for Bitcoin is long overdue,” said Antoni Trenchev, CEO of crypto lender Nexo.

“Bitcoin is starting to find its feet after a shaky month, and the next week will show,” Trenchev said.

The US central bank is expected to raise interest rates again at its next policy meeting, but economists are predicting a less aggressive hike this time to 75 basis points instead of 100.

Cryptocurrencies were touted as a source of value uncorrelated with traditional financial markets. But as institutional capital poured into digital assets, this thesis failed to materialize as the Fed began raising interest rates and traders fled stocks.

A rally above $22,700 means the cryptocurrency has now regained its 200-week moving average, laying the technical foundation for a “trend reversal,” according to Yuya Hasegawa, crypto market analyst at Japanese crypto exchange Bitbank.

“The market needs a little more certainty about a slowdown in the pace of rate hikes by the Fed,” he said. “Still, a short-term outlook for bitcoin is bullish and it could go as high as around $29k this week.”

Meanwhile, traders are betting that the worst of an intense market contagion caused by liquidity problems at some major crypto firms is likely to have abated.

Digital currencies have been under tremendous selling pressure over the past couple of months as the collapse of some notable businesses caused ripple effects in the market. Terra, a so-called algorithmic stablecoin, plunged to near zero in May, setting off a chain of events that eventually led to the bankruptcies of crypto firms Celsius, Three Arrows Capital and Voyager.

Elsewhere in crypto, ether climbed more than 1% to $1,543.76, while other so-called “altcoins” were also higher.

The second-largest token has surged more than 40% in the past seven days, fueled by optimism over a long-awaited network upgrade known as “Merge.”

Developers now expect the update, which will move ethereum away from environmentally questionable crypto mining to a more energy-efficient system, to be completed by September 19.

“Cryptomining has been heavily criticized for contributing to climate change due to its energy-intensive nature, and as wildfires rage across Europe and the US, the promise that Ether transactions could be less harmful to the environment has caused a wave of interest,” said Susannah Streeter, senior investment and market analyst at Hargreaves Lansdown.