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Cryptocurrencies were higher on Monday after recovering from a sharp drop in the previous week.
Bitcoin rose 1% to $19,457.00, according to Coin Metrics, while ether traded 1.5% higher at $1,317.01.
Prices have held steady since rebounding from a big drop that followed the release of the latest reading on the consumer price index, a key inflation gauge. Yuya Hasegawa, crypto market analyst at Japanese crypto exchange Bitbank, said the dip wasn’t deep enough to induce panic, however.
“It had been another tough week for the stock market until the CPI, so Thursday’s rebound will likely trigger unwinding of the recent risk off sentiment, which could have a positive effect on the price of bitcoin,” he said. “If the price recovers the $20,000 psychological level with a substantial trading volume in the next few days, bitcoin could test $23,000 next week.”
Despite a recent divergence in volatility, activity in bitcoin and ether trading remain closely tied to that of risk assets more broadly. While October is typically a strong month for crypto trading, crypto has never been in such a strongly macro driven bear market.
“Hovering around yearly lows in trade volumes, bitcoin and ether are crying out for the next crypto-specific catalyst that will kickstart another bull run and a decoupling from equities,” Conor Ryder, an analyst at Kaiko, told CNBC. “The Merge proved yet again that macro is king and we saw that last week with a volatile reaction to CPI.”
Bitcoin climbed as high as about $19,900 in its big rebound last week. Ryder agreed that a substantial break above $20,000 could usher in a new level higher.
“Crypto markets have staged a respectable recovery since the initial reaction to the inflation reading and investors are now eyeing up the psychologically important $20,000 level for bitcoin, which should result in a climb higher if breached,” he said.
However, “it looks as if crypto and stocks will move in tandem for the rest of the year, both likely tracking sideways until there is a hint that the Fed will start to reverse the recent regime of monetary tightening,” he added.
