Bitcoin pushed its way back toward US$30,000 ($40,064.25), extending a recent period of turbulence around the closely watched round-number level.
The world’s largest digital currency rose as much as 5.2% on Thursday to trade at US$29,883. Smaller tokens including Ether, Cardano and Avalanche made gains too, reflecting buoyant sentiment across the crypto market.
The US$30,000 mark is “quite a significant psychological level,” said Mati Greenspan, chief executive officer of Quantum Economics. He added that the next Bitcoin halving — which is expected in about a year — can spur more optimism for the token.
“Bull runs often start out during this time — or at least it tends to mark the end of the bear market from a Bitcoin cyclical point of view,” he said.
There’s been little agreement on what catalysts are driving crypto prices in recent days.
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Some have posited that turmoil in the banking sector may be pushing some investors toward digital assets, which are seen to be separate of the traditional financial system. In addition, expectations that the Federal Reserve will eventually pivot to lowering interest rates may have contributed to the upswing as well.
Others say that crypto has been correlated to the tech space, meaning that when those stocks rise — as they have been this year — so does Bitcoin.
But to Morningstar’s Madeline Hume, that relationship might not be prevalent for long.
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“When markets start to unwind and some of those risk-off bets start to come off and people have more options about the future, we see Bitcoin start to peel off historically in terms of its correlation with other asset classes,” said Hume in an interview. “You see a washing out of the 2020 froth and a return to the pre-2020 market drivers, so there’s no reason to think the market has permanently changed from a behavioural aspect.”
Contributing to recent swings are liquidity pressures, which have been a persistent issue for crypto markets since the collapse of crypto exchange FTX in November. Retail investors, in particular, have been largely absent from the space compared to when Bitcoin was hitting new highs at the end of 2021.
Though it remains well below its 2021 record of near US$69,000, Bitcoin has rebounded 80% in 2023, weathering a US crypto crackdown and the long shadow of FTX’s failure. But its jump has sputtered around US$30,000, with the token poking above that level only to slip back.
“Looking at the chart, we can see a picture-perfect test of the 50-day moving average,” Greenspan said. “Holding that level as support is pretty bullish and I expect if we crack a new local top, it will strike additional FOMO.”
Tellingly, its 30-day rolling correlation with gold has surged since March and stood at 57% as of Wednesday, according to blockchain-data-provider Kaiko — its highest level in almost two years.
Bitcoin “is a risk asset, but it is also more than that,” wrote Noelle Acheson, author of the “Crypto Is Macro Now” newsletter. “It is also an ‘insurance’ asset, and as such is an intriguing banking strain play: one of the only assets that can straddle both narratives.”
