Bitcoin Rally Cools After Rising to Highest Level Since June
(Bloomberg) — Bitcoin’s four-day rally cooled after the biggest cryptocurrency climbed above $26,000 for the first time since June on growing optimism that the digital asset sector will weather the latest turmoil in the U.S. financial system.
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The native digital currency rose as much as 9.4% to $26,510 before cutting its gains by about half on Tuesday. It has rallied about 30% since Silicon Valley Bank failed on March 10. Data from derivatives trading data site Coinglass shows that around $230 million in short crypto positions were liquidated over the past 24 hours.
“While dark clouds sit over Silicon Valley, Bitcoin is booming,” Fiona Cincotta, senior financial market analyst at City Index, said by email. “Cryptocurrency Extends Impressive Rally, As Traditional Banks Struggle To Maintain Customer Confidence.”
The virtual-digital-tokens market stabilized after a jittery week in which three crypto-friendly US banks collapsed as local regulators took steps over the weekend to bolster the country’s banking sector, including pledging to fully protect depositors. The moves also helped bring the world’s second-largest stablecoin, USDC, back to its intended $1 peg, which cracked over the weekend after the shutdown of Silicon Valley Bank.
The government’s bailout of Silicon Valley Bank depositors was seen as a boon by many investors, helping push Bitcoin past its 200-day moving average of $19,740, said Hayden Hughes, co-founder of social trading platform Alpha Impact. Sustained moves above the 200-DMA are usually early indicators of a bull market, he said.
“If we stay at 25k, the next stops will be 28 and 30k,” Hughes said.
The rapid recovery has been conspicuous in light of the collapse of the crypto-friendly banks. Bitcoin gained more than 12% on Monday, following rallies on both Saturday and Sunday. The advance over the past three days is the best performance since October 2019, according to Vetle Lunde, senior analyst at K33 Research.
Crypto supporters on Tuesday also pointed to a rise in underlying US consumer prices for February as something that helped support token prices. Many in the market have argued for years that Bitcoin can be seen as a hedge against inflation, although this has not always been reflected in data and prices over the past year. The coin is down 33% in the past year – and even more so when you consider the drop from the 2021 all-time high of around $69,000.
“It’s the Sunday announcement effect,” Brian Nick, investment strategist at Nuveen, said of the rally. “Since all the uninsured deposits are guaranteed, it helps crypto.”
–With assistance from Muyao Shen and Vildana Hajric.
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