Bitcoin falls, but could reach its highest level in months. Stocks must cooperate.

The price of Bitcoin has fallen close to 2% in the past 24 hours to $23,750, after topping $24,500 in earlier trade. The biggest digital asset had been heading closer to $25,000 – levels it has flirted with since mid-February and which, if held, would be the highest consistent price since last June. Bitcoin’s rally to start 2023 – a rise of around 50% – has spurred another bull market, although prices remain well below the late 2021 high near $69,000.

“Bitcoin came under pressure on Tuesday and Wednesday amid falling stock indexes. Last night the decline stopped, helping the crypto market recover some of its losses,” said Alex Kuptsikevich, an analyst at brokerage FxPro, noting that Bitcoin ended below $24 000 on Wednesday for the first time in eight days.

While Bitcoin’s outperformance this year has countered its correlation to the stock market — strengthening amid 2022’s tough macroeconomic backdrop of high inflation and rising interest rates — cryptos have recently fallen back in line with stocks. The

Dow Jones Industrial Average

and

S&P 500

has been under pressure in recent days as investors worry that the Federal Reserve will continue to raise interest rates aggressively this year as the central bank continues to battle inflation.

Higher prices boost returns to risk-free assets, such as US Treasuries, and in turn dampen demand for riskier plays such as Bitcoin and stocks. High interest rates were a key force behind the market selloff last year, and optimism that the worst is over has been a factor boosting cryptos in 2023.

This macro pressure is likely to continue to be important for Bitcoin and other digital assets. The next big catalyst is likely to come on Friday with the release of the January personal consumption expenditures (PCE) index, which is the Fed’s preferred measure of inflation. PCE – and the stock reaction – will likely need to work together for Bitcoin to continue to rise.

“There is clearly belief in the return to the crypto markets and some confidence that the darkest days are behind us,” said Craig Erlam, analyst at broker Oanda. “If the news flow can stay in, that could prove to be the case, and a break of $24,500-$25,500 could add to this belief.”

Indeed, the technical picture appears to be improving, with key levels just north of $25,000 in sight that will confirm the momentum behind the crypto rally and pave the way for more gains for Bitcoin.

“Our long-term momentum gauges are still pointing lower, but we would view a confirmed breakout (consecutive weekly bars above $25,200) resistance as a bullish long-term development,” said Katie Stockton, managing partner at technical research firm Fairlead Strategies.

Beyond Bitcoin,

Ether

— the second-largest digital asset — fell less than 1% to below $1,650. Smaller crypto or altcoins were also down, with both

Cardano

and

Polygon

down 1%. Memecoins were more mixed, with

Dogecoin

however down 1%

Shiba Inu

jumped 2%.

Write to Jack Denton at [email protected]