cryptocurrency market It was just a financial soap opera in 2022, and the drama continued last week when lender Celcius Network filed for bankruptcy protection. However, there is one important place where the drama has been noticeably cooled. The actual price of the largest digital token itself.
Bitcoin rose nearly 8% in the last three days of the working week, while Ether surged 20%. Neither of the two dominant tokens has set a new low in this bearish market for nearly a month. Bitcoin is hugging a closely watched $20,000 round number, while Ether is hovering near $1,000. Both tokens rose further over the weekend, with Bitcoin gaining around $21,500 and Ether higher at $1,365 on Sunday morning.
The relative stabilization of the chart is fueling hopes that the pandemic may have progressed after the tokens on the Terra blockchain suffered a dazzling collapse. According to James Check, senior analyst at Glassnode, much of the leverage in the cryptocurrency world is hidden from scrutiny because much of the leverage is not recorded on the blockchain, but seeing it is encouraging.
“I think most of the forced selling has already happened,” Check said in an interview. “Basically, the market looks relatively stable.”
Two important sources of potential sellers remain. Please take note. One is a Bitcoin miner who has witnessed a sharp drop in hardware values along with token prices. This could be even more stressful when Celsius’s mining subsidiary starts unloading some of its 80,850 rigs to raise capital. The other is a trader who recklessly sells all kinds of risky assets when the stock market starts crashing again.
In that regard, this week brought some potentially good news for the laser eye set. For starters, the S&P 500 is holding about 5% higher than last month’s bear market lows. And the 40-day correlation between Bitcoin and the Nasdaq 100 index retreated to its weakest level since January, suggesting that the two are less vulnerable to lockstep movements in either direction.
According to James Malcolm, head of foreign exchange and crypto research at UBS, a decisive push to prices will require a new catalyst. However, one good sign that the market may normalize is the strong performance of secondary tokens like Matic and Aave.
“What we are seeing in crypto right now is a situation where individual stories matter a bit more,” he said. “Some of them have to do with new products, some have to do with technology upgrades, and some have to do with business alliances. So I think we’re moving towards a more traditional market.”
That said, this famous volatile asset class has proven over and over again that picking the bottom or top is a risky endeavor. And the green buds that appear to be emerging this crypto winter will need to be nourished by macroeconomic factors that are currently being driven by the US Federal Reserve’s decision to wipe it out with sky-high inflation and higher interest rates.
“I don’t want to extrapolate too much,” said Marc Chandler, chief market strategist at Bannockburn Global Forex, about the recent stabilization of cryptocurrency prices. “For me, the quieter tone I’ve seen in crypto this week may be a reflection of a lack of engagement as people try to figure out what to do in this environment where the Fed is clearly tightening.” — Michael P Regan and Vildana Hajric, (c) 2022 Bloomberg LP
Fingers crossed that the worst thing about passwords could be over.
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