Bitcoin climbed to a nine-month high Monday and is up 70% year-to-date, as turmoil in the banking sector is driving some investors to turn to digital assets. It has been the best week in four years for the cryptocurrency.
The biggest cryptocurrency rose as far as $28,567, its highest since mid-June, and was last up 0.9%, amid growing expectations that central banks would slow the pace of interest rate hikes. Tuesday, Bitcoin ended at $28,197.
After FTX imploded, bitcoin was "all but left for dead," The Wall Street Journal reports. Created in 2009 on the heels of the global financial crisis by an unknown internet user named Satoshi Nakamoto, bitcoin was launched as an alternative to bank failures.
"Its stunning rally is the result of the banking crisis, and as the interest rate markets prices in rate cuts in the second half of 2023," said Tony Sycamore, an analyst at IG Markets, predicting a move towards $32,000 should bitcoin hold above the key support level about $25,000.
Other market players predicted that bitcoin would benefit from central bank efforts to bolster liquidity in the global financial system. It rose to a record of $69,000 in November 2021 after central banks and governments launched unprecedented monetary and fiscal stimulus measures.
"The momentum is all driven by liquidity," said Markus Thielson at digital asset firm Matrixport in Singapore.
"When you see the banking system in peril, you realize that bicoin was really invented to create independence from those risks and to get away from the whims of central banks," Michael Safai, managing partner at Dexterity Capital a high-frequency trading firm, tells WSJ.
The recent increase in bitcoin has primarily been driven by a small group of wealthy cryptocurrency investors, according to Clara Medalie, director of research at Kaiko. They are betting on the Federal Reserve slowing down its interest rate increases, which would directly benefit bitcoin, she says.
Safai concurs: "A lot of people in crypto think that interest rates are turning around and that's going to be great and spark a new bull run."
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