Cryptocurrencies rise as market selloff stalls, bitcoin climbs back above $17,000

Cryptocurrencies climbed on Thursday as the market took a break from a two-day selloff as investors digested key inflation data and the ongoing FTX saga.

Bitcoin rose 9% to $17,967.53, while ether advanced 13% to $1,325.78, according to Coin Metrics.

Cryptocurrencies jumped right around the time CPI data was released, showing a smaller-than-expected increase. It gave investors hope that price pressures can be cooling and optimism at a time of extreme fear.

“This started as a relief rally after yesterday’s massive selloff, but turned into speculation along with all other risk assets that the Fed may slow rate hikes after a lower-than-expected CPI print,” Steve McClurg, chief investment officer at Valkyrie, told CNBC.

Bitcoin’s correlation with stocks hit an all-time high in late September, but has been falling for about a month now, although it saw a slight uptick on Wednesday, according to Coin Metrics. Shares also rose after the CPI data.

“The industry is changing before our eyes – high-velocity environments can make it a young market,” said Callie Cox, US investment analyst at eToro. “Right now, it’s hard to digest from a pricing standpoint because crypto doesn’t have a fundamental center of gravity. But we know society is moving toward a decentralized future, and blockchain technology has already proven to be hugely useful.”

The spike also comes as investors are still digesting the details of the ongoing crisis at FTX and the potential contagion its failure could spread across the market. On Wednesday, bitcoin posted a two-day loss of around 24% and later in the evening fell further to a new bear market low of $15,558.10. Ether lost about 32% over the two days.

Despite the current reversal, bitcoin remains more than 70% off its all-time high, reached exactly one year ago.

Bitcoin and ether, the two largest cryptocurrencies by market capitalization, led the rest of the market higher. Solana, which has been hit hard by the FTX scandal, climbed 30% after losing more than 70% this week. Even FTT, the FTX token at the center of the exchange’s woes, jumped 21%. It fell around 140% earlier this week.

Investors are still monitoring the situation at FTX, still unclear about the extent of the damage that has hit or will hit the rest of the market.

On Thursday, Sam Bankman-Fried, CEO of the troubled exchange, broke his silence on the matter and offered an apology to investors and the crypto industry for his mistakes in the liquidity crisis.

As events unraveled this week, investors hoped to see Binance save the day through a potential bailout, but its CEO announced late Wednesday that it had abandoned the idea.

Bankman-Fried is now in talks to raise capital to “be used first to do right by the clients,” he said in his apology tweets.

“We still think there is some leverage to unwind…so not short-term bullish. A lot of asset managers have funds stuck in FTX,” McClurg said. “There will likely be a wave of redemptions on this news, causing a third wave of selling pressure. In the long term, we are bullish and believe we are near the bottom.”