Crypto comeback: Bitcoin bounces back after brutal selloff. Black Friday came to cryptocurrencies last week when Bitcoin posted its roughest day in two months. But by Monday things were looking up.
Bitcoin is staging a comeback along with other riskier assets on Monday, bouncing back from its Black-Friday lows.
The largest digital asset rose as much as 3.4% during the session to trade around $58,266. Other coins also posted snap-backs, with the Bloomberg Galaxy Crypto Index adding 5.5% at one point. So-called alternative coins like Polkadot and Dogecoin gained too.
A brutal selloff on Friday saw investors flee a number of riskier assets, including cryptocurrencies, and Bitcoin posted its worst day in about two months. The beating came after the announcement of a new variant of the coronavirus called omicron that was identified in southern Africa and that experts are now trying to understand. The session decline saw Bitcoin fall 20% below an all-time high recorded in early November, which for many strategists shows the currency’s tendency to closely follow the movements of the broader stock market.
“It highlights that Bitcoin is a risk-on/risk-off asset,” said Matt Maley, chief market strategist for Miller Tabak + Co.
Meanwhile, in a development that is essentially Kryptonian, a coin called the Omicron crashed and later recovered when news of the eponymous variant spread. Although little is known about the coin so far, data from CoinGecko.com shows that it has been around for a few weeks and that its market capitalization is around $ 370 million.
Bitcoin has been under pressure since reaching a record of almost $69,000 Nov. 10 on enthusiasm over the first U.S. exchange-traded fund linked to futures of the digital asset. But a multitude of factors have weighed on returns since then, including greater regulatory risks as well as many tokens having run up very quickly in a short period of time. Maley says that Bitcoin’s recent moves also show that should the Federal Reserve withdraw its stimulus in a more aggressive fashion next year, cryptos could become vulnerable.
Fiona Cincotta, Senior Financial Markets Analyst at City Index, says that Bitcoin tends to act as a riskier asset that tracks movements in the stock market, but that there are times when that relationship is not as strong – for example, when is hotter than if expected inflationary impressions are obtained, Bitcoin can hold up well during those periods.
“So there are times when I think Bitcoin does act as a riskier asset and it traces the stock market higher, but there are times as well when that’s not necessarily the case,” she said by phone. “It does have other contributing factors which drive it.”
Now nervous traders are turning to techies again for clues as to where certain cryptocurrencies might be beheaded. Bitcoin on Sunday bounced off its 100-day moving average, a medium-term trend line. Meanwhile, Ether on Monday broke out of its 50-day moving average, which many chart watchers see as a bullish development.
Still, Peter Tchir, head of macro strategy at Academy Securities Inc., says he was surprised by Bitcoin’s Friday selloff based on the coronavirus news. To him, it seems there is a group of aggressive risk-takers who own crypto and likely also own some high-flying tech stocks.
“They could be forced to sell one or the other if they move in tandem,” said Tchir. “Bitcoin going up relieves that pressure. Now that we’ve had what seemed like a likely rally — everyone dismissing omicron fears — we can see if it lasts.”
SOURCE: ALJAZEERA