Bitcoin surges above $28,000 for the first time since June 2022 amid banking chaos, high inflation and hopes of a dovish Fed
Turmoil in the banking sector, warmer than expected inflation data, and renewed hopes for a dovish Federal Reserve have pushed Bitcoin to levels not seen in about nine months.
The largest digital asset topped $28,000 for the first time since June 2022, trading as low as $28,258 on Sunday. Since the beginning of the year, the price of Bitcoin has increased by almost 70%. Other digital assets have also rallied – with Ethereum up around 17% since the start of last week and so-called altcoins like Solana and Cardano are also advancing.
Traders waded 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, rose above 30. But Bitcoin remained firm – and straight up.
“Bitcoin is correlated to liquidity conditions and real rates. Real rates have fallen, liquidity conditions have widened and it looks like we are entering a new regime,” said Ilan Solot, co-head of digital assets at Marex.
Broader markets fluctuated last week after a handful of American lenders failed, and new concerns arose around Credit Suisse Group front GA UBS Group AG agreed to buy its fellow Swiss bank on Sunday. In the aftermath, some investors called on the Fed to suspend interest rate hikes. But mid-week data showed the core CPI rose more than expected, a reminder that the fight against inflation is far from over. It’s unclear how the central bank will react to the mixed signals at this week’s Fed meeting.
This uncertainty has troubled many corners of the financial world, but has emboldened Bitcoin bulls who see the digital asset as a hedge against inflation, despite evidence to the contrary over the past year. In 2022, a series of bankruptcies and scandals caused the price of Bitcoin to fall by more than 60%.
The token also rose despite internal conflicts in the digital asset space. USD Coin briefly lost its peg with the dollar this month, and the U.S. Securities & Exchange Commission is double on the belief that most digital assets are considered securities.
The S&P 500 fell 1.1% on Friday. If Bitcoin was still trading the way it has for much of 2022, the token would have crashed alongside US stocks. But this month, the correlation between the digital asset and the S&P 500 has dissipated.
“In this case, we definitely see people moving into Bitcoin,” said David Martin, head of institutional coverage at Digital Asset Prime Brokerage FalconX.
–With the help of Muyao Shen.