BTC breaks a key mark for the first time in three weeks
On Monday, the price of bitcoin topped $17,000 for the first time since mid-December, pushing the rest of the cryptocurrency market up as traders bought the cryptocurrency on expectations that the US Federal Reserve would soften its hawkish stance this year.
By 00:26 ET (0526 GMT), bitcoin was up 1.7% to $17,235.3, helped by a weakening dollar after U.S. nonfarm payroll data released last Friday showed that The labor market is “cooling”. This gives the Federal Reserve less economic room to raise interest rates sharply.
The world’s No. 2 cryptocurrency, Ethereum, also surged to a more than 3-week high, climbing 4% to break the $1,300 mark for the first time since mid-December.
The prospect of a slower Fed rate hike came as a big relief for the crypto market, which has plummeted in value through 2022 as the Fed’s monetary tightening wiped out 2 years of ultra-accommodative policies that the entire crypto space has enjoyed. This sharp drop also triggered a series of high-profile bankruptcies from which the cryptocurrency market is still recovering.
This week, the focus will also be on US inflation data due on Thursday. Signs of easing price pressure could give the Fed more incentive to curb its hawkish rhetoric.
But even though bitcoin could benefit from a less hawkish stance from the Fed, the cryptocurrency is trading at levels not reaching 2021 highs. It fell 65% in 2022, casting doubt on its supposed status as a store of value, a currency, or even an inflation hedge.
Such a sharp drop in value, combined with a string of high-profile crypto bankruptcies in 2022, has also dampened retail investor sentiment towards cryptocurrencies in general.
Cryptocurrencies lost more than two-thirds of their value in 2022 and so far they are struggling to recover during the first trading week of this year.
However, past cycles have shown that cryptocurrency bull rallies only occur during periods of loose monetary policy. With the Fed softening its hawkish stance this year and possibly halting its rate hike cycle towards the end of the year, cryptocurrencies could strengthen in 2024.
But whether the cryptocurrency can bounce back from a massive blow to retail sentiment and a potential tightening of regulation remains to be seen.