Bitcoin Surges Above $21,000 Amid Optimism Around Inflation

(Bloomberg) — Bitcoin rallied over $21,000 on Saturday amid optimism that it may have bottomed out and inflation has peaked.

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The biggest cryptocurrency surged 7.5% to $21,299 before paring gains throughout the day. It had not been above $20,000 since November 8, and Saturday was the 11th straight day of advances. The second-largest token, Ether, was up 9.7%, and others such as Cardano and Dogecoin also posted gains. Solana rose as much as 35%.

The overall cryptocurrency market cap has crossed $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. “We seem to have hit an ‘air pocket’ of supply and breaking the $20,000 resistance took a few stops. Optically, $20,000 for many is a fundamental level.”

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

The Federal Reserve is on course to scale back to smaller interest rate hikes after further cooling in prices, although it is likely to continue rising until pressures show more definite signs of easing. That helped boost risky assets like the Nasdaq 100 stock index, which gained for six straight days.

“Cryptoassets performed well after the soft CPI print, suggesting that the crypto’s correlation with the macro won’t disappear any time soon,” said Sean Farrell, head of digital asset strategy at Fundstrat. “This week’s follow-up on price action is certainly encouraging,” and barring any forced liquidations from troubled cryptocurrency firm DCG, “there is a high probability that the absolute bottom is in cryptocurrency prices.”

Bitcoin price was stuck in a tight range around $16,000 to $17,000 for weeks before the latest breakout. The upward moves took the shorts by surprise — short liquidations in crypto reached $100 million in five out of the last six days, according to data from Coinglass. Saturday’s total was the highest, coming in at $449 million.

Katie Stockton, co-founder of Fairlead Strategies, warned of the rally, which took Bitcoin above its 200-day moving average for the first time in a year.

“Deeply overbought short-term readings defy positive momentum, so we would not chase the rally at these levels,” she said in a note on Friday. She sees resistance near $21,500, where there is a 61% Fibonacci retracement level.

Still, the upward trajectory could inject even more optimism into a market that has struggled to find good news in recent months.

“The drop in the CPI coupled with the announcement that FTX liquidators have recovered $5 billion in liquid assets gave the crypto markets plenty of factors to forget about the macro picture, which is still bearish,” said Hayden Hughes, CEO of the crypto trading platform. social negotiation Alpha Impacto. “Markets have plenty of positive momentum heading into the next FOMC meeting later this month.”

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