Bitcoin tops $28,000 for first time since June 2022 amid banking chaos, high inflation, hopes for dovish Fed

Bitcoin bulls are enjoying a solid run. getty

Unrest in the banking sector, warmer-than-expected inflation data and renewed hopes for a dovish Federal Reserve have sent Bitcoin to levels not seen in about nine months.

The biggest digital asset topped $28,000 for the first time since June 2022, trading as much as $28,258 on Sunday. Since the start of the year, Bitcoin’s price has risen almost 70%. Other digital assets also rose – with Ethereum up around 17% since the start of last week and so-called altcoins such as Solana and Cardano also advancing.

Traders watered down high levels of uncertainty last week in the markets. US two-year yields fluctuated wildly, and the Cboe Volatility Index, the so-called fear gauge also known as the VIX, soared above 30. But Bitcoin held firm – and straight up.

“Bitcoin is correlated with liquidity conditions and real interest rates. Real interest rates have fallen, liquidity conditions have widened, and it looks like we’re entering a new regime,” says Ilan Solot, co-head of digital assets at Marex.

Broader markets wobbled in the past week after a handful of U.S. lenders failed and fresh concerns emerged over Credit Suisse Group AG before UBS Group AG agreed to buy its second Swiss bank on Sunday. In the fallout, some investors have asked the Fed to pause rate hikes. But midweek data showed that the core CPI rose more than expected, a reminder that the fight against inflation is far from over. It is unclear how the central bank will respond to the conflicting signals at this week’s Fed meeting.

That uncertainty plagued many corners of the financial world, but emboldened Bitcoin bulls who see the digital asset as a hedge against inflation, despite last year’s evidence to the contrary. In 2022, a series of bankruptcies and scandals pushed the price of Bitcoin down more than 60%.

The token also rose despite internal strife in the digital asset space. USD Coin briefly lost its peg to the dollar this month, and the US Securities & Exchange Commission is doubling down on its belief that most digital assets qualify as securities.

The S&P 500 fell 1.1 percent on Friday. If Bitcoin continued to trade as it did for much of 2022, the token would have fallen in tandem with US stocks. But this month, the correlation between the digital asset and the S&P 500 has disappeared.

“In this case, we definitely see people looking at Bitcoin,” said David Martin, head of institutional coverage at digital asset prime brokerage FalconX.

-With the assistance of Muyao Shen.