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jason xx
Jan 09, 2023 5:31AM ET
It crossed 17K Sunday
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⏰ React to the Market Faster with Custom, Real-Time News Get Started
Bitcoin clears $17k for the first time in 3 weeks as Fed jitters ease
© Reuters.
By Ambar Warrick
Investing.com -- Bitcoin prices rose past $17,000 for the first time since mid-December on Monday, leading gains across broader cryptocurrency markets as traders bought into the space on growing expectations that the Federal Reserve will soften its hawkish stance this year.
The world’s largest cryptocurrency rose 1.7% to $17,235.3 by 00:26 ET (05:26 GMT), helped by weakness in the dollar after nonfarm payrolls data released on Friday showed that the U.S. jobs market was cooling. This gives the Federal Reserve less economic headroom to hike interest rates at a sharp clip.
World no. 2 cryptocurrency Ethereum also rose to an over three-week high, rising 4% and breaking above the $1,300 level for the first time since mid-December.
The prospect of slower interest rate hikes by the Fed comes as a great relief to the cryptocurrency market, which plummeted in value through 2022 as the Fed’s monetary tightening unwound two years of ultra-accommodative policy enjoyed by the space. This sharp drop in value also triggered a string of high-profile bankruptcies, which the crypto market is still reeling from.
Focus this week is also on U.S. inflation data due on Thursday. Signs of easing price pressures could give the Fed more impetus to curb its hawkish rhetoric.
But even though Bitcoin stands to benefit from a less hawkish Fed, the cryptocurrency is trading at a fraction of highs hit during 2021. The cryptocurrency plummeted 65% in 2022, a drop that challenged its proposed status as a store of value, a currency, or even an inflation hedge.
This steep drop in value, coupled with a string of high-profile crypto bankruptcies in 2022, has also soured sentiment among retail investors towards cryptocurrencies at large.
The space lost over two-thirds of its value in 2022, and has so far struggled to make a comeback in the first trading week of the year.
Still, past cycles have shown that cryptocurrency bull runs occur only during periods of easy monetary policy. With the Fed now set to soften its hawkish stance this year and potentially pause its rate hike cycle later this year, crypto could see some strength going into 2024.
But whether the space will be able to recover from a severe blow to retail sentiment and the potential tightening of regulations remains to be seen.
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