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bitcoin Shares surged to their highest in nearly a month on Thursday as traders bet on cooling U.S. inflation and digested news that lawyers for defunct cryptocurrency exchange FTX had found assets worth billions of dollars.
The world’s largest digital currency climbed above $18,000 for the first time since Dec. 12. At 14:00 on Wednesday night, the value has increased by about 5% in the past 24 hours. Bitcoin was trading at $18,154.35 as of 5 a.m. ET Thursday, according to CoinMetrics data.
Lawyers for collapsed cryptocurrency exchange FTX said on Wednesday they had uncovered about $5 billion in “liquid” assets, including cash and digital assets. The recovery will be a boon for FTX clients after the cryptocurrency exchange crashed in November.
Still, lawyers for FTX warned that $5 billion in assets is so high that selling them could put significant downward pressure on the market, depressing its value.
“Bitcoin has been on a downtrend for over a year, which is standard for a cryptocurrency bear market,” Vijay Ayyar, vice president of corporate development and international at cryptocurrency exchange Luno, told CNBC in emailed comments Thursday morning.
“We’ve had a lot of negative events over the past year, and if you look at how the price has reacted to those events, in general, it’s fallen less and less – it shows how well the market has taken the news. High, the selling pressure is being absorbed, so we are entering an accumulation phase,” he added. “It could also mean that the market thinks the worst is over for cryptocurrencies, with most of the negative news now priced in.”
U.S. inflation data due on Thursday is expected to show softening inflation. Economists surveyed by Dow Jones expected the consumer price index to fall 0.1% in December from the previous month.
Inflation is still expected to rise by 6.5% year-on-year, although this will be lower than the 7.1% rise in November and well below the peak of 9.1% in June. Investors are hoping the decline could put pressure on the Fed to reverse the trend of rate hikes.
The Federal Reserve and other central banks have been raising interest rates for the past year or so in an effort to curb soaring inflation — a move that has forced stocks and cryptocurrencies sharply lower in 2022.
Now I hope the central bank will cut interest rates to reduce the pressure on risky assets.
“Today’s CPI data can be very telling, and a hot CPI data will certainly spell trouble for risky assets like cryptocurrencies,” Ayyar said.
Ayyar warned that this news or further negative news for the cryptocurrency could send the price of bitcoin below $17,000, setting the stage for further declines and the digital asset could drop into the $12,000 to $14,000 range.
Bitcoin is down about 74% from its November 2021 all-time high of $68,990. Nearly $1.4 trillion in value was wiped off the cryptocurrency market last year as traders dumped risky assets such as technology and growth stocks.
Bitcoin and the broader digital currency market also tumbled, pointing to an increased correlation with major stock benchmarks such as the Nasdaq Composite.
The plunge was also caused by crypto-specific issues, including the collapse of projects and companies such as FTX and Terra.
However, Bitcoin is off to a good start in 2023, with its price rising steadily over the past 12 days.
A rise in the price of bitcoin on Thursday lifted other digital currencies. Ether, the second-largest token, rose nearly 5 percent to $1,397.78, while Binance’s BNB token rose 3 percent to $283.
Binance CEO Changpeng Zhao told CNBC on Wednesday that the exchange plans to increase hiring by 15% to 30% in 2023, in stark contrast to other exchanges that have cut staff.
Binance, which earlier allocated $1 billion for a fund aimed at propping up the industry after FTX’s collapse, has itself been dominated by concerns about the soundness of its reserves. Mazars, the auditor responsible for the company’s so-called proof of reserves, suspended all work with the crypto firm in December.
Binance says it has enough assets to cover its liabilities.