XRP Leads The Cryptocurrency Recovery, Bitcoin Surpasses $21,000 As Rate-Hike Fears Fade.
XRP has risen by up to 16% in the last 24 hours as bitcoin surpassed the $21,000 mark and the largest cryptocurrency showed signs of recovery following a severe drop last week.
Solana’s SOL tokens increased by 8% after the development team announced the cryptocurrency-native Solana mobile phone at a New York event yesterday. Avalanche’s AVAX gained 8%, extending its gains from Thursday, when the project provided a native bridge to the Bitcoin network. Polygon’s MATIC provided a 17% bump to Thursday’s run.
Bitcoin (BTC) broke above the $21,000 barrier in the European afternoon hours, adding to a gradual rebound after the weekend’s drop to around $18,000. The asset’s current levels have worked as a resistance zone for the largest cryptocurrency by market capitalization, and a rebound above them may see it jump over $22,600.
Bitcoin has seen selling pressure in the last week as a result of systemic risks within the cryptocurrency market, such as crypto lenders suspending withdrawals and the collapse of prominent crypto fund Three Arrows Capital, which owes creditors hundreds of millions of dollars in bitcoin and other cryptocurrencies.
The recovery on Friday came as the broader equity and bond markets gained. Asia’s stocks rose, with Hong Kong’s Hang Seng rising 2.09% and the Shanghai Composite and India’s Sensex rising 0.89%. In midday trade, the Stoxx Europe 600 rose 1.49%, while US futures rose at least 0.50%.
According to Reuters, US Federal Reserve Chair Jerome Powell said on Thursday that the Fed’s commitment to containing 40-year-high inflation was “unconditional,” and that he expected economic growth to perk up in the second half of the year after a sluggish start to 2022.
While Powell’s statements suggest that higher interest rates are on the way, Jeffrey Halley, senior market analyst at OANDA, said clients in a note that markets are still pricing in “a recession stopping rate hikes in their tracks much sooner.”
Goldman Sachs and Morgan Stanley issued further warnings earlier this week, claiming that recession risks had not been “fully priced in” by investors. Citi estimates that the likelihood of a recession is 50%.
“The moves this week, could still turn out to be the result of a financial market genetically preprogrammed to buy dips in equity and bond prices, thanks to two decades of central bank largess. It could also be a bear market correction as the stampede for the exit door got overdone in the short term, leading to a short-squeeze.”
Powell’s remarks come as investors remain concerned about inflation and supply-chain disruptions. In an effort to combat inflation, the Fed raised interest rates by 75 basis points last week, the biggest in 28 years. In July, another 50-75 basis point increase is expected.
Meanwhile, cryptocurrency traders are wary of the latest market reversal. “It will be too early to talk about a long-term reversal,” FxPro’s Alex Kuptsikevich said earlier this week to CoinDesk. “All negative fundamentals remain. Until sharp monetary-policy tightening becomes the norm, financial market pressures can quickly negate bounces in cryptocurrencies.”
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