The world’s largest cryptocurrency by market capitalization Bitcoin, increased 7.6% in the prior day, the highest single-day percentage gain since March 8. The recovery came after nine weeks of losses and a recent failure by sellers to hold prices below the critical support level of $28,800, which corresponds to the July 2021 low on Coinbase. This increase comes after the S&P 500 index surged 6.58 percent last week, marking its highest week since November 2020.
Ironically, this increase may serve as a temporary sigh of relief for Bitcoin bulls, who last week saw the asset finally break its strong correlation to stocks, but at the expense of its price.
The risk reset appears to have been driven by optimism that the Federal Reserve’s (Fed) peak hawkishness, or propensity to suck liquidity out of the economy, is over. The Federal Reserve may take a break from tightening policy in September, according to Bank of America. The picture was bolstered further by data released on Friday showing that the Fed’s preferred gauge of inflation, the personal consumption expenditures (PCE) price index, climbed 0.2 percent in April, the weakest gain since November 2020.
Expectations for faster Fed rate hikes have been lowered by rate traders. Traders are currently pricing less than a 40% chance that the benchmark interest rate will be between 2.25 percent and 2.5 percent following the September meeting, according to the CME’s FedWatch tool. This is down from a week ago when it was 50%. This year, the central bank boosted rates by 75 basis points, bringing the benchmark borrowing cost from 0.75 percent to 1%. For risky/growth-sensitive assets like Bitcoin and stocks, monetary tightening is negative.
After Monday’s increase, Bitcoin’s daily chart has turned positive. Active Bitcoin entities and the number of active entities continue to stagnate, according to data gathered by blockchain analytics firm Glassnode.
“This is a typical characteristic of past bear markets, where the transaction activity of the network is dominated by the HODLer class, who are far more price insensitive,” Glassnode said in his weekly newsletter, which was released late Monday.
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