Bitcoin and other cryptocurrencies rose on Wednesday, benefitting from improved investor mood after the stock market stopped a multi-day losing streak, and appeared set for more gains as the holiday season nears.
However, the digital asset industry is still under pressure, so crypto traders are bracing for further turbulence.
Bitcoin’s price has risen by less than 1% in the last 24 hours to $16,875, climbing upward from a trough below $16,500 on Tuesday. The stock market was leading the way higher, with the Dow Jones Industrial Average and S&P 500 projected to rise on Wednesday after the indexes stopped a four-day losing run on Tuesday.
“Given the reaction across other asset classes, Bitcoin’s rally is somewhat unimpressive as crypto traders continue to remain in wait-and-see mode over what will be the next big crypto domino to fall or if we get any clearer guidance over the regulatory front,” said Edward Moya, an analyst at broker Oanda.
Cryptos and stocks have grown increasingly connected in the face of a challenging macroeconomic climate of high inflation, rising interest rates, and approaching recession concerns in 2022. According to R.A. Wilson, chief technical officer of token exchange 1GCX, such events indicate that macro headwinds appear to be becoming more troublesome, and the Bitcoin and crypto market is now looking fragile.
It seems like we may be experiencing another leg down.
Wilson also stated that liquidity has dried up across all markets due to the Federal Reserve’s significant tightening of monetary conditions. Will we breach the lows of this cycle? It’s possible. And investors and dealers are undoubtedly waiting for this.
And it is the reality that both stocks and coins have dropped in value over the previous week as investors fear the Federal Reserve may raise interest rates to battle inflation. While traders have shaken off the last wave of anxiety, these pressures remain in the market.
Analysts are also expecting additional drops in digital assets, which are still under pressure following the startling collapse of the crypto exchange FTX last month. Bitcoin fell from $21,000 in early November, before the FTX problems became publicly publicized, to a two-year low at $15,500 in recent weeks.
Beyond Bitcoin, the second-largest cryptocurrency, Ethereum, stayed unchanged at roughly $1,200. Smaller cryptos or altcoins were down, with Cardano down 3% and Polygon down 1%. Memecoins were also depressed, with Dogecoin and Shiba Inu both losing 2%.