Cryptocurrencies continue higher, with bitcoin looking at a test of $20,000
Photo illustration of Bitfinex cryptocurrency exchange website.
Dado Ruvic | Illustration | Reuters
Cryptocurrencies continued to climb on Friday as investors sought to extend the previous day’s rally.
Bitcoin was higher by more than 1% at $19,652.00, and ether gained more than 3% to trade at $1,328.80. Both assets are on pace for their fourth down week in the last five.
Crypto jumped on Thursday, following the movement of stocks after the consumer price index came out showing higher than expected inflation. That reading initially sent risk assets down sharply before they reversed and soared, with the Dow Jones Industrial Average staging a historic 1,500-point rally.
“Yesterday we saw a knee jerk reaction lower in all markets which was algo-driven, then short-covering and real buying stepped in, which was the right response to the CPI data,” said Jeff Dorman, chief investment officer at Arca. “Markets aren’t concerned with inflation, they are concerned with the Fed’s expected response to inflation, and nothing changed yesterday: 75 basis points was baked in, it was confirmed further by the CPI data.”
October tends to be an up month for bitcoin, according to Bespoke Investment Group. Bitcoin’s never been in a bear market like this one, however, and some remain cautious.
The cryptocurrency’s third-quarter return of 6% – and ether’s 25% return – outperformed other asset classes and both have held up fairly well, trading within the $19,000 level for much of the past month, due to the uncertain macro environment. However, “the subdued volatility relative to other assets on continued declining volumes has the potential to lead to downside,” Compass analyst Chase White said in a note Friday.
It had been a tough week for markets before the CPI data was released. Yuya Hasegawa, crypto market analyst at Japanese crypto exchange Bitbank, said the rebound could trigger an unwinding of recent risk-off sentiment in stocks.
That “could have a positive effect on the price of bitcoin,” he said. “If the price recovers the $20,000 psychological level with substantial trading volume in the next few days, bitcoin could test $23,000 next week.”