Bitcoin Price Breaks $17K as Equities Jump on US Fed Speculation

US equities and a bitcoin are testing the top of their medium-term range as traders hope for a ‘soft landing’

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Source: Shutterstock / Sittipong Phokawattana modified by Blockworks

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Bitcoin’s daily trading session closed above $17,000 for the first time in almost a month on Sunday, following a favorable showing in US equities to close out last week.

The crypto, which is currently changing hands for around $17,200 per bitcoin, has been met by a modest amount of daily trading volume on major exchanges, and an uptick in volatility — which has been at historic lows. [indicating the relief rally could be short-lived.]

Most cryptos in the top 20 have followed suit, with cardano and solana the largest gainers — rising more than 19% and 20% respectively over the past 24 hours. Solana saw a return of speculators last week chasing the latest dog-inspired meme coin, BONK.

Bitcoin is now trading at levels not seen since Dec. 13 where it jumped 3.5% on the day to reach a peak of $18,373 a day later. The crypto succumbed to a large sell-off on Dec. 15, courtesy of the current bear market climate and sell-side pressure.

“Over the course of last week, we saw increased passive liquidity — as displayed by deeper order books and tightening bid/ask spreads mid-week,” Kurt Grumelart, special projects lead at trading firm Zerocap told Blockworks.

Grumelart said the outperformance in various subsectors of the crypto market was helping to drive key narratives and prop up prices. Those include liquid staking derivatives, which have experienced “substantial rallies” in anticipation of a first-quarter launch of Ethereum’s Shanghai upgrade that will enable withdrawals of staked ether.

DeFi-related assets exhibited marginal growth alongside a jump in the industry’s overall market capitalization, which grew 3.3% on Sunday to $885 billion. 

Sitting within the top 10 of Messari’s DeFi assets category, Curve (CRV) and Maker (MKR) have witnessed growth over a 24-hour period, up 15.7% and 9% respectively. A general shift away from centralized entities to decentralized ones, following the blowout of FTX, are helping to drive up value in the sector, Clearpool CEO Rob Alcorn told Blockworks.

“An entire generation of crypto products and protocols will be defined by their ability to survive last year’s stress tests and re-emerge as critical pieces of market infrastructure to lead a more compliant industry into the next bull market,” Alcorn said.

US equities and the broader markets rally ahead of bitcoin

Buoyed by speculation of easing interest rate hikes by the US Federal Reserve, traders looked to signs of cooling wage growth and a contraction in services activity as a primary motivator. 

Anticipation is now building over a tapering of the Fed’s future rate hikes from 50 basis points to around 25 basis points to be declared at the next Federal Open Market Committee meeting by month’s end.

US equities had their best daily showing in more than a month on Friday with the S&P500 rising 2.3% to 3,895 while the Dow Jones Industrial was up 2.1% to 33,630. That represented the largest daily gains for US equities since Nov. 30 — 37 days ago.

So far, Asian shares have reacted positively to the favorable US moves, with Australia’s ASX index rising 0.6% to 7,153, Japan’s Nikkei 225 index also up 0.6% to 25,973, and in Europe the German DAX opening up 0.3% in the first hour of Monday trading.

Coupled with better-than-expected nonfarm payroll figures (NPF), which measures the US labor force minus farmers and some other sectors, the macro environment has led to an increased bid in risk assets like crypto, Grumelart said.

“Considering these drivers, the digital asset space is positioned to capitalize on a more favorable start to the year from a macro front,” he said. Though considerable challenges to the market, including the conclusion to the FTX debacle, will likely suppress prices in the short term.

Still hanging over the market, Damocles’ sword-style, however, is the ongoing uncertainty over Digital Currency Group, and its subsidiaries, Genesis and Grayscale.


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