Bitcoin surged above $21,000 on Saturday amid optimism that it may have bottomed and inflation has peaked.
The biggest cryptocurrency rose 7.5% to $21,299, before paring gains as the day progressed. It hadn’t topped $20,000 since Nov. 8, and Saturday was the 11th straight day of advances. The second-largest token Ether jumped 9.7%, and others like Cardano and Dogecoin also saw gains. Solana went up to 35%.
The overall market capitalization of the crypto universe topped $1 trillion for the first time since early November, according to data from CoinGecko.
“There has been a steady rise since the start of the year,” said Cici Lu, CEO of Venn Link Partners Pte. “It feels like we hit an ‘air pocket’ of supply and breaking through the $20,000 resistance led to a few stops. Optically, $20,000 for many is a key level.
United States in the short term inflation expectations fell in early January to the lowest in nearly two years, giving a bigger-than-expected boost to consumer sentiment, according to preliminary survey results from the University of Michigan. A separate report showed consumer prices rose 6.5% in the 12 months to December, marking the lowest rate of inflation in more than a year.
The Federal Reserve is on track to downgrade to lower interest rate hikes following further cooling in prices, although it is expected to continue to rise until pressures show more definite signs of slowing. . This helped boost risky assets like the Nasdaq 100, who won for six consecutive days.
“Crypto-assets performed well after the soft CPI print, suggesting that crypto’s correlation to the macro isn’t going away anytime soon,” said Sean Farrell, head of digital asset strategy at Fundstrat. “The tracking of price action this week is certainly encouraging,” and barring any forced liquidation of struggling crypto firm DCG“there is a high probability that the absolute bottom will be reached for crypto prices.”
Bitcoin price was stuck in a tight range around $16,000-$17,000 for weeks before the latest breakout. The upside moves surprised shorts — crypto short liquidations have topped $100 million in five of the past six days, according to data from Coinglass. Saturday’s total was the highest, topping $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 near-term readings are challenging positive momentum, so we won’t continue 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 the liquidators of FTX recovered $5 billion in liquid assets have given crypto markets plenty of factors to forget about the macro picture, which is still bearish,” said Hayden Hughes, managing director of social trading platform Alpha Impact. “Markets have a lot of positive momentum heading into the next FOMC meeting later this month.”
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