Bitcoin has rallied to its highest levels since last summer in a rally that has swept early 2023.
Dreamstime
Bitcoin
and other cryptocurrencies were largely paused on Friday, holding at levels reached after a recent rally. A recent trend in the crypto options market suggests that a spike in volatility—and possibly a big move upward—could come in the day ahead.
The price of Bitcoin has traded flat over the past 24 hours to just shy of $23,000. The largest digital asset has rallied some 40% in a matter of weeks, enjoying a roaring start to the year that has carried Bitcoin to the highest levels in five months and erased losses that came after crypto exchange FTX’s November bankruptcy rocked markets. Bullish traders are calling it a turning point in the brutal bear market and “crypto winter” that has seen Bitcoin lose two-thirds of its peak value, hitting a multi-year low in November.
A factor spurring Bitcoin’s gains has been a general improvement in risk sentiment, with cryptos gaining alongside the
Dow Jones Industrial Average
and
S&P 500
—a continuation of the correlation between digital assets and stocks. Investors are upbeat that inflation is past its peak and that the Federal Reserve will be less aggressive with interest-rate hikes, which were a key headwind for risk assets last year.
But technical factors in the digital asset market have accelerated the recent rally, including low liquidity exacerbating price swings and bullish trading in crypto derivatives, specifically Bitcoin options. And there is reason to believe the day ahead will see more of the same based on a pattern seen this year.
Two of Bitcoin’s latest big leg ups have come on a Friday, with Jan. 13 seeing the jump to $21,000 from $19,000, and Jan. 20 delivering the rise to $23,000 from $21,000. These spikes have been tied to volatility and positioning in the Bitcoin options market, according to Pierino Ursone, the head of options at Deribit, which is a major venue for crypto derivatives trading.
Beyond Bitcoin,
Ether
—the second-largest crypto—was 2% lower at $1,575. Smaller cryptos or altcoins were doing better, with
Cardano
1% in the green and
Polygon
8% higher. Memecoins were more muted, with both
Dogecoin
and
Shiba Inu
less than 1% in the red.
Write to Jack Denton at jack.denton@barrons.com
Credit: marketwatch.com