
The price of Bitcoin (^BTCUSD) is down about 6% since Fed Chair Powell signaled higher-for-longer interest rates to combat inflation last Friday. Bitcoin prices dipped below $20,000 to a 1-1/2 month low Monday on negative carry-over from Powell’s hawkish rhetoric, but prices early today rebounded above $20,000, giving investors hope that Bitcoin prices may have bottomed.
The recent fall in Bitcoin prices is roughly in line with losses in the tech-heavy Nasdaq 100 index ($IUXX) (QQQ) over the same period, a positive for the cryptocurrency. In the past, Bitcoin losses have sometimes been well above the weakness in traditional assets during a time of stress. Despite recent setbacks, Bitcoin has not seriously tested its 20-month low of $17,614 posted in June.
The $20,000 level in Bitcoin, while far below the near-$69,000 record from November 2021, is seen as a gauge of whether Bitcoin prices have bottomed. Senior Oanda Analyst Ed Moya said, “Bitcoin is showing some resilience here as it has clawed back above the $20,000 level, despite widespread stock market weakness. Crypto traders are not used to seeing Bitcoin withstand a rout on Wall Street, so this could be a promising sign.”
Average daily Bitcoin moves, whether to the upside or downside, have narrowed this month compared with earlier this year, coming in at 2.4% for declines and 1.4% for advances versus peaks of 4.1% and 3.4%, respectively, in June, according to Bloomberg data. While the smaller trading ranges might support the view that a floor in Bitcoin prices is close, other indicators suggest otherwise, such as traders paying a premium for options protecting against a fall in Bitcoin below $18,000.
The head of trading at digital-asset exchange Independent Reserve, John Toro, said cryptocurrencies continue to trade as “a high-beta risk asset.” However, he expects the upcoming upgrade of the Ethereum (^ETHUSD) network, known as the Merge, to continue to “attract investment capital and support dips in cryptocurrency pricing.”
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