The flagship cryptocurrency asset, Bitcoin, started the week trading at $24,800, as ether, the native token of the Ethereum blockchain, traded at $1,689.
The rally comes despite the slew of bad news the cryptocurrency space has experienced, especially in the past week. Recall that on February 13, the New York State Department of Financial Services ordered Paxos to “cease minting” the Paxos-issued Binance USD dollar-pegged stablecoin.
Also, Reuters reported on February 16 that a bank account controlled by Binance.US moved over $400 million to the trading firm Merit Peak, which is supposedly an independent entity also controlled by Binance CEO Changpeng Zhao.
In the last week, Bitcoin has gained over 14% while ether has gained over 13.50%. Layer 1s like Solana, Polkadot, and Polygon have also made double-digit gains, up 28%, 24%, and 26% respectively, in the last seven days. For the meme coins, DOGE is up 7.80% in the last seven days and SHIB is up 8.00%.
They are both rallying because of a reaction to Elon Musk’s tweet from last, which should support the tokens. Another meme coin, Floki, named after Musk’s dog, is down 7% on the day but still up 108% for the week.
What You Should Know: The rally in the price of Bitcoin comes despite the US Consumer Price Index (CPI) increasing by 0.50%. The CPI is the US Federal Reserve’s preferred measure of inflation and an increase in the CPI rate could be higher than expected interest rate increases, in a bid to tackle inflation.
Some members of the Fed reserve have hinted at the possibility of a higher-than-expected interest rate hike to tackle the current inflationary environment. Two of the Federal Reserve’s most hawkish policymakers have signalled, they may favour returning to bigger interest-rate hikes in the future, and said they saw the case for raising rates by a half-point at the central bank’s meeting earlier this month.
The Cleveland Fed President Loretta Mester explained on Thursday that she saw a “compelling economic case,” for a 50 basis-point interest-rate hike at the next Fed meeting. This view was also supported by her St. Louis counterpart, James Bullard. Both officials also said policymakers need to be open to bigger rate hikes going forward if economic conditions warrant.
- “My overall judgment is it will be a long battle against inflation, and we’ll probably have to continue to show inflation-fighting resolve as we go through 2023,” Bullard told reporters Thursday.
The regulatory pressure wave continued on Feb. 17 as the United States Securities and Exchange Commission announced a $1.4-million settlement with former NBA player Paul Pierce for allegedly promoting “false and misleading statements” regarding EthereumMax (EMAX) tokens on social media. While we have seen a lot of bad news in the space, it has, however, not brought a negative impact on the price of crypto assets as investors remained optimistic.
While there are reasons to be pessimistic, there are also reasons to be bullish on cryptocurrency. While two Fed presidents have signed for a higher interest rate hike, some investors still believe that the Fed will approve a second, 25 basis point, interest rate hike at its next Federal Open Market Committee (FOMC) meeting in March instead of returning to the more aggressive increases of 2022.
Technical Analysis: Retail traders usually avoid quarterly futures due to their price difference from spot markets. Meanwhile, professional traders prefer these instruments because they prevent the fluctuation of funding rates in a perpetual futures contract.
The two-month futures annualized premium is expected to trade between +4% and +8% in healthy markets to cover costs and associated risks. Thus, when the futures trade is below this range, it shows a lack of confidence from leverage buyers. This is typically a bearish indicator.
The metric shows a bullish trend with the Bitcoin futures premium breaking above the 4% neutral threshold on Feb. 16. With the current bullish trend of this metric, it means that the market has returned to a neutral-to-bullish sentiment that prevailed until early February. As a result, pro traders are becoming more comfortable with Bitcoin trading above $24,000.
What They are Saying: Speaking on the recent actions by regulators, Al Morris, the founder of the decentralized publishing protocol, Koii Network, said:
- “Based on their unwillingness to come to the table, it’s clear that the SEC’s motivations of late are being driven by a desire to protect the financial incumbents – that is, Wall Street.”
He also added that overly harsh U.S. regulations could benefit other crypto hubs in Europe and Dubai.
Joe DiPasquale, CEO of crypto fund manager BitBull Capital, said that $23,000 is bitcoin’s new support level and the next week is critical if bitcoin is to hit $30,000. He explained in an interview with CoinDesk saying:
- “It was critical for Bitcoin to reclaim $23,000 if we were to see more upside action. With February coming to an end, another bullish monthly close may be what the market needs for Bitcoin to test $30,000.”
DiPasquale thinks we’ll see the market consolidating if not going up, with a limited downside in the short term.
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