Bitcoin retreated after briefly climbing back above $30,000 for the first time in a week, reminding investors of the volatility that has long been a key attraction for many traders.
(Bloomberg) — Bitcoin retreated after briefly climbing back above $30,000 for the first time in a week, reminding investors of the volatility that has long been a key attraction for many traders.
The largest cryptocurrency by market swung between a gain of as much as 7.3% and a loss of around 1% during New York trading hours, before settling in at about $28,100. Around $1 billion worth of open interest on Bitcoin derivatives were liquidated during the price swings, data from Coinalyze show.
Fueling the burst of volatility was a litany of speculation, including that a well-known trading firm was dumping Bitcoin, the US government was selling the cryptocurrency and even that tokens connected to the Mt. Gox collapse may finally be reintroduced into the market.
“As fixed income rallied yesterday on the increasing probability of FRC’s demise, Bitcoin obviously rallied strongly,” Spencer Hallarn, derivatives trader at crypto investment firm GSR, said in a direct message. “When BTC couldn’t convincingly break 30k, and fixed income sold back off today, that left us vulnerable to a selloff IMHO.”
US bank regulators weighed the prospect of downgrading their private assessments of First Republic Bank — a move that may curb the troubled firm’s access to Federal Reserve lending facilities. The failure of several crypto-friendly banks earlier this year helped to bolster the argument that crypto was isolated from banking sector woes.
Google trends data shows that over the past seven days that in the US, the search terms ‘First Republic Bank’ and ‘FRC’ (the bank’s stock ticker) are those most closely associated with Bitcoin, said Stephane Ouellette, chief executive of FRNT Financial Inc, a crypto brokerage firm.
Bitcoin had struggled to maintain its upward momentum after reaching $30,000 earlier this month for the first time since June 2022, dropping under $27,000 on Monday.
“I don’t see any big fundamental change in the crypto market,” said Ilan Solot, co-head of digital assets at Marex. “The drawdown last week was largely driven by leverage liquidations. The underlying trend still looks positive to me. Markets have already accepted that there will be continued negative regulatory news from the U.S., and doesn’t seem to care anymore.”
Crypto-related stocks also briefly benefitted from the short-lived rebound in Bitcoin. Marathon Digital jumped 5%, MicroStrategy gained 2.9%, and while Coinbase finished lower on the day after edging higher earlier.
“Crypto is really an expression of sentiment, it’s something that trades off of sentiment,” Que Nguyen, CIO of equities at Research Affiliates, said on an upcoming episode of the What Goes Up podcast. “There’s no intrinsic value necessarily related to crypto. Where crypto does derive value is in the community that is enthusiastic about it. And so if the community is really enthusiastic about it, it’s great. If the community loses interest in it, it just goes away.”
–With assistance from Vildana Hajric and Carly Wanna.
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