(Bloomberg Opinion) — Bitcoin rose more than $21,000 on Saturday amid optimism that it may have bottomed out and inflation may have peaked.
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The largest cryptocurrency was up as much as 7.5% at $21,299. It hadn’t been above $20,000 since Nov. 8 and Saturday marked its 11th straight day of advance. The second largest Ether rose as much as 9.7%, with other tokens such as Cardano and Dogecoin also posting solid gains. The overall market capitalization of the crypto universe surpassed $1 trillion for the first time since early November, according to data from CoinGecko.
The gains came amid a consumer price report last week that showed inflation eased in January from December levels. The Fed is on track to slow to smaller interest rate hikes after that further cooling, though it is likely to keep rising until price pressures show more definite signs of slowing. That helped boost risk-on assets like the Nasdaq 100 stock index, which has gained for six straight days.
“Crypto assets performed well after the soft CPI print, suggesting that the crypto-macro correlation is not going away any time soon,” said Sean Farrell, Fundstrat’s head of digital asset strategy. “This week’s follow-up on price action is certainly encouraging,” and barring forced liquidations of troubled cryptocurrency firm DCG, “there is a high probability that cryptocurrency prices have bottomed out.”
The Bitcoin price was stuck in a tight range around $16,000 to $17,000 for weeks before this latest breakout. The bullish moves have caught shorts by surprise: Cryptocurrency short liquidations have exceeded $100 million in five of the past six days, according to data from Coinglass. Saturday’s total was the highest, topping $296 million.
“The CPI decline, coupled with the announcement that FTX liquidators have repossessed $5 billion in liquid assets, has given crypto markets plenty to forget about the macro outlook, which remains bearish,” Hayden Hughes, CEO from the Alpha Impact social trading platform. he said in a message on Saturday. “Markets have a lot of positive momentum going into the next FOMC meeting later this month.”
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