By Suvashree Ghosh
Bitcoin pushed its way back toward $30,000, extending a recent period of turbulence around the closely watched round-number level.
The largest token rose as much as 3.7% on Thursday to trade at $29,469.45, before paring the advance to around $28,930 as of 9:30 a.m. in New York. Smaller tokens including Ether, Cardano and Avalanche made gains too, reflecting a general buoyant sentiment across the crypto market.
“We’re seeing short positions getting liquidated into a market that exhibits thin order books, pushing up the Bitcoin price,” said Stefan von Haenisch, head of sales trading at OSL SG Pte in Singapore.
On Thursday, Bitcoin had surged as much as 7.3% but quickly erased the move and fell into the red, leaving investors scratching their heads — as is often the case with swings in crypto prices. The retreat sparked a litany of speculation. The theories included the suggestion that a well-known trading firm was dumping Bitcoin and that the US government was selling the cryptocurrency. Another claim was that tokens connected to the Mt. Gox collapse may finally be reintroduced into the market.
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Contributing to recent swings are liquidity pressures, which have been a persistent issue for crypto markets since the collapse of crypto exchange FTX in November. Market makers and institutional investors largely absent from the space compared to Bitcoin’s heights at the end of 2021.
Bitcoin, on track for its fourth straight monthly gain, has rebounded 75% in 2023 from last year’s rout, weathering a US crypto crackdown and the long shadow of FTX’s failure. Expectations that the Federal Reserve will eventually pivot to lowering interest rates have helped to breathe life into digital-asset markets.
But Bitcoin’s jump has sputtered around $30,000, with the token poking above that level only to slip back. It remains $40,000 down from its 2021 record.
Some market watchers pegged Wednesday’s early pop to the notion that the token is viewed as a hedge for US banking angst, which flared again around First Republic Bank. The hedge argument is based on the contention that Bitcoin embodies an alternative to the fiat-based banking sector.
Tellingly, the world’s largest digital asset’s 30-day rolling correlation with gold has surged since March and stood at 57% as olf Wednesday, according to blockchain data provider Kaiko — its highest level in almost two years.
Bitcoin “is a risk asset, but it is also more than that,” wrote Noelle Acheson, author of the “Crypto Is Macro Now” newsletter. “It is also an ‘insurance’ asset, and as such is an intriguing banking strain play: one of the only assets that can straddle both narratives.”