- The bellwether cryptocurrency, which is seen as a proxy for overall risk appetite in the nascent asset class rose over 2% on Sunday to briefly shoot past US$25,000.
- Nevertheless, Bitcoin bulls have appreciated the asset’s more recent decline in correlation with risk assets such as the tech-centered Nasdaq 100 Index.
Bitcoin bulls were given a brief reprieve as the benchmark cryptocurrency topped US$25,000 in thin trading over the weekend before retracing and testing the support at US$24,000 again on Monday in Asian trading (at the time of writing).
The bellwether cryptocurrency, which is seen as a proxy for overall risk appetite in the nascent asset class rose over 2% on Sunday to briefly shoot past US$25,000, while Ether shot past US$2,000 on optimism over an upcoming software upgrade known as the Merge.
Concerns over the global economy have taken center stage this week as China’s surprise factory orders drop has become interpreted as an ominous sign for markets.
Although there remain some investors who are cautiously optimistic that the U.S. Federal Reserve can avoid a recession despite its fight against inflation, there is growing concern that a global downturn could be sparked off by the world’s second largest economy.
Cryptocurrencies have struggled for the most part of this year, after hitting all-time-highs last November and against a backdrop of inflation and tightening monetary policy weighing on risk appetite.
Bitcoin, Ether, and other cryptocurrencies have now all fallen by over 50% this year alone and even though weaker U.S. inflation data this month has helped spark a rebound, many investors remain skeptical about the durability of the reversal.
The Fed has repeatedly said it wants to see a noticeable slowdown in price pressures before it begins to commit to considering pivoting its current policy stance and that will make it unlikely that fresh inflows of money into the cryptocurrency sector can be expected in the immediate term.
Nevertheless, Bitcoin bulls have appreciated the asset’s more recent decline in correlation with risk assets such as the tech-centered Nasdaq 100 Index.
It’s probably still too early to call a bottom on cryptocurrencies, although a lot of leverage has already been washed out of markets and if and when conditions do turn, there could be plenty of room for a credit-fueled rebound.
