- Bitcoin is on the fly, with its price possibly hitting above $17,500 as the crypto market shakes off the impact of the FTX contagion on the industry.
- In its latest weekly institutional note, Coinbase remarked that the overhangs of the negative sentiments of the past few weeks are wearing off.
At the start of the year, selling risky assets like stocks and Bitcoin and buying the USD against other currencies were the most popular activities among investors and brokers. However, market players are currently reconsidering their commitment to the supposed “hawkish” Federal Reserve trades and are moving back to risky assets. As investors begin to disregard the Fed’s stance on the economy, they are now targeting investment in risky assets except BTC.
The high inflation sentiment and the Fed’s talks on moderation in its interest rate hike in December have been the cause of this sudden shift. For the first time in 7 months, Wall Street’s benchmark metric, S&P 500, spiked 16 percent in one month to trade ahead of the 200-day moving average. Similarly, the fiat pair, USD/JPY, dropped 11 percent in their 200-day moving average, with the USD index slumping to its lowest in months.
The US government bond yields fell sharply from their previous highs at the start of the year, thus confirming the peak inflation sentiment and the risk reinforcement in the equity and currency markets. However, Bitcoin seems to have unchained itself from the macroeconomic actions, as it currently trades at $17,340.
Thus, the recent FTX collapse comes at a worse time for the broader crypto market and, by extension, Bitcoin. According to Markus Thielen, the lead researcher at Matrixport, US stocks and cryptocurrency have had a strong relationship. He said:
The stock and crypto markets have historically functioned alongside each other. …Without the FTX debacle, BTC could have been trading at $29,000 instead of the current projected $17,200.
Thielen added that if the crypto market can manage to shake off the FTX contagion, Bitcoin might start trading at $29,000. The asset witnessed a two-year price drop following Bitcoin’s slip to $15,480 in November. The market has continued to feel the impact of the steady decline in the value of the largest crypto asset.
The Declining FTX Contagion
With Bitcoin’s recent market performance, it appears that the industry is beginning to put the worst of the FXT’s crash behind. Over the past week, BTC spiked 4 percent despite the latest bankruptcy filing submitted by the crypto lender, BlockFi. In its latest weekly institutional note, Coinbase remarked that the overhangs of the negative sentiments of the past few weeks are wearing off.
Hence, the industry is witnessing a less noticeable impact of the FTX insolvency. However, the Coinbase statement explained that the crypto market has yet to assess the full extent of the uncertainty. For Bitcoin, its recent recovery suggests that the height of the FTX panic has faded.
With investors having confidence in the BTC, more investment in the asset would boost investors’ confidence in the broader crypto market. Investors are now determining whether to invest or wait for the token to reach another low point before taking a plunge.
Meanwhile, famous Bitcoin advocate and investor Max Keiser shared similar sentiments as Coinbase’s recent remarks about BTC’s price movement and investor sentiment in his recent tweet.
Record high investment in the #BTC network comes from investors with high conviction that see BTC as perfect money replacing trillions of archaic, state fiat. Attacks on BTC increases conviction. BTC is designed to be attacked. It increases conviction, hash-rate, security & price pic.twitter.com/O9SPY5pUTZ
— Max Keiser (@maxkeiser) December 5, 2022
Keiser tweeted that the high record investment in the bitcoin network is proof of investors’ renewed confidence that the leading digital asset can genuinely act as an inflation hedge against the fiat. He further said the attacks on BTC will boost its hash rate, conviction, security, and price.
