January 31, 2023

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Bitcoin rises above $21,000 amid inflation optimism

(Bloomberg) — Bitcoin rose more than $21,000 on Saturday on optimism that it may have bottomed out and that inflation has peaked.

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The largest cryptocurrency rose 7.5% to $21,299, before paring gains as the day progressed. It hasn’t been above $20,000 since November 8, and Saturday marked the 11th consecutive day of advances. The second largest token, Ether, is up as much as 9.7%, and others like Cardano and Dogecoin are also making gains. Solana rose as much as 35%.

The total market capitalization of the crypto world has risen above $1 trillion for the first time since early November, according to data from CoinGecko.

“There has been a steady rise since the beginning of the year,” said Cici Lu, CEO of Venn Link Partners Pte. “It looks as if we hit an ‘air pocket’ of supply and broke the $20,000 resistance, which triggered some stops. Visually, $20,000 is a key level for many.”

Short-term inflation expectations in the United States in early January fell to their lowest level in nearly two years, providing a bigger-than-expected boost to consumer sentiment, according to the University of Michigan’s preliminary survey reading. A separate report showed consumer prices rose 6.5% in the 12 months through December, marking the slowest rate of inflation in more than a year.

The Fed is on track to shift to lower rate hikes after further slowdown in rates, although it will likely continue to rise until pressures show more definite signs of slowing. That helped boost risky assets like the Nasdaq 100, which has posted gains for six straight days.

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“Crypto assets performed well after the soft CPI print, which indicates that the cryptocurrency’s macro correlation is not going away anytime soon,” said Sean Farrell, Head of Digital Asset Strategy at Fundstrat. “Following price action this week is definitely encouraging,” and barring any forced liquidations from troubled crypto firm DCG, “there is a high probability of an absolute bottom for cryptocurrency prices.”

Bitcoin price was stuck in a tight range between $16,000 and $17,000 for weeks before the latest breakout. The bulls have surprised the shorts — cryptocurrency shorts have topped $100 million in five of the past six days, according to data from Coinglass. Saturday’s gross was the highest, at $449 million.

Katie Stockton, co-founder of Fairlead Strategies, issued a warning about the rally, which has taken Bitcoin above the 200-day moving average for the first time in a year.

“Short-term overbought readings are challenging the positive momentum, so we will not chase higher at these levels,” it said in a note on Friday. It sees resistance near $21,500, where the 61% Fibonacci retracement level is located.

However, the upward trajectory may inject more optimism into a market that has been struggling to find good news in recent months.

Hayden Hughes, CEO of social trading platform Alpha, told Impact. “The markets have a lot of positive momentum heading into the next FOMC meeting later this month.”

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