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and other cryptocurrencies continued to rally, blowing through key price levels at the end of the week and spurring calls of a new bull market amid a macroeconomic backdrop that could favor cryptos over stocks.
The price of Bitcoin has risen 6% over the past 24 hours to near $26,175, returning to levels seen earlier this week and the highest point for the largest digital asset since the crypto crash accelerated last June. Bitcoin has jumped well more than 50% so far this year, and despite a setback earlier in March—which saw it drop back below the key $20,000 mark—was back on a bullish tear.
“From a technical perspective, if Bitcoin could close above $26,000, it could signal the beginning of a bull market,” said Yuya Hasegawa, an analyst at crypto exchange Bitbank.
Traders have shaken off headwinds from the collapse of crypto-focused U.S. banks Silvergate and Signature Bank in recent weeks, even as these banking failures risk new regulatory pressures and negative impacts on digital asset market liquidity. Rather, pressure on banks—including the meltdown of Silicon Valley Bank, the largest since the 2008-09 financial crisis—that has come as an unintended consequence of the rapid rise in interest rates over the past year has proven a tailwind.
The Federal Reserve has raised rates dramatically in a bid to get decades-high inflation under control, slamming demand for risk-sensitive assets like stocks and cryptos—and making Bitcoin closely correlated with the
and
While traders had assumed the Fed would keep hiking rates in the face of continued rising prices, pressure on banks has spurred an about-face in expectations, with markets now pricing in much more accommodative monetary policy.
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“We’re seeing more signs that the Fed will be forced to halt its tightening measures. A reversal or pause by the Fed will buoy risk assets, including Bitcoin,” said Alex Thorn, the head of research at digital asset group Galaxy. “We expect to see significant demand as Bitcoin moves further past $25,000.”
But that doesn’t mean both cryptos and stocks will benefit from this trend. Some investors fear that as the impact of higher rates continues to sweep through the U.S. economy—a process that can take many months—the risk of a slowdown to recessionary levels will rise. While this will hurt corporate earnings and weigh on the major stock indexes, Bitcoin may be more immune, especially if future expectations remain focused on an eventual reversal by the Fed toward lowering rates. Lower rates and easier policy laid the groundwork for Bitcoin’s last bull run.
“As the economy heads towards a recession, the cryptoverse could look more attractive than equities. It appears the downside risks are greater for the S&P 500 than they are for Bitcoin,” said Edward Moya, an analyst at broker Oanda.
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Cryptos remain a high-risk asset—but this week bank stocks have behaved that way too—with a laundry list of issues including the regulatory backdrop and investor interest that has waned amid the bear market. But there is at least a logical case for Bitcoin to outperform the stock market. If the rally can continue past $30,000—where Bitcoin fell off a cliff last summer—that case could strengthen.
Beyond Bitcoin,
—the second-largest crypto—advanced 3% to $1,720. Smaller cryptos or altcoins also were in the green, with
up 2% and
popping 4%. Memecoins exhibited much of the same, as
jumped 5% and
gained 3%.
Write to Jack Denton at jack.denton@barrons.com
