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Bitcoin Tops $26,000 on Buoyant Sentiment After US Bank Steps

Bitcoin Tops $26,000 on Buoyant Sentiment After US Bank Steps
The Bitcoin logo on a screen in Hong Kong, China, on Wednesday, 21 December 2022. (Photo: Paul Yeung/Bloomberg)

Bitcoin climbed above $26,000 for the first time since June on growing optimism that the digital-asset sector will weather the recent turmoil in the US financial system.

The largest cryptocurrency gained for a fourth day, increasing as much as 9.4% to $26,510. It has rallied about 30% since Silicon Valley Bank failed on March 10. Data from derivatives-trading data site Coinglass show that about $230 million in short crypto positions were liquidated in the past 24 hours.

“While dark clouds sit over Silicon Valley, Bitcoin is booming,” Fiona Cincotta, senior financial markets analyst at City Index, said by email. “Cryptocurrency is extending its impressive rally, as traditional banks struggle to maintain the trust of customers.”

Bitcoin Hits Highest Since June

The virtual-digital-tokens market stabilized after a jittery week that saw three crypto-friendly banks in the US collapse as local regulators over the weekend took steps to shore up the nation’s banking sector, including pledging to fully protect depositors. The measures also helped to bring the world’s second-largest stablecoin, USDC, back to its intended $1 peg, which cracked over the weekend following the shutdown of Silicon Valley Bank.

The government bailout of Silicon Valley Bank depositors was seen as a boon by many investors, and helped push Bitcoin past its 200-day moving average of $19,740, said Hayden Hughes, co-founder of social-trading platform Alpha Impact. Sustained moves above the 200-DMA are usually early indicators of a bull market, he said.

“If we stay at 25k, the next stops would be 28 and 30k,” Hughes said.

Read more on implications for crypto after latest bank failures

The rapid recovery has been eyepopping in light of the collapse of the crypto-friendly banks. Bitcoin added more than 12% on Monday, following rallies on both Saturday and Sunday. Its advance over the past three days is its best such performance since October, 2019, according to Vetle Lunde, senior analyst at K33 Research.

Crypto proponents on Tuesday also pointed to an increase in underlying US consumer prices for February as something that helped to support token prices. Many in the market have argued for years that Bitcoin can be seen as a hedge against inflation, though that hasn’t always borne out in data and pricing over the past year. The coin is down 33% over the past year — and even more when considering its fall from its 2021 all-time high of around $69,000.

“It’s the Sunday-announcement-effect,” said Brian Nick, chief investment strategist at Nuveen, of the rally. “As all those uninsured deposits are guaranteed, that helps crypto.”

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