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Bitcoin rose to its highest price in nearly a month on Thursday as traders bet on cooling U.S. inflation and digested news that defunct cryptocurrency exchange FTX lawyers had found billions of dollars in assets.
The world’s largest digital currency has surpassed $18,000 for the first time since December 14, and has gained nearly 5% in the past 24 hours. Bitcoin was trading at $18,154.35 at 5 a.m. ET on Thursday, according to data from CoinMetrics.
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On Wednesday, lawyers for collapsed cryptocurrency exchange FTX said they had found about $5 billion in “liquid” assets, including cash and digital assets. The recovery after the cryptocurrency imploded in November will be a welcome boon for FTX clients.
However, FTX lawyers warned that the $5 billion cache was so high that a sale of the assets could cause significant downward pressure on the market and reduce their value.
“Bitcoin has been in a downtrend for over a year now, which is a standard period of a bear market in cryptocurrency,” Vijay Ayyar, vice president of corporate development and international at cryptocurrency exchange Luno, told CNBC in an email Thursday morning.
“We’ve had a lot of negative events over the past year, and if you look at the price reaction to those events, it’s generally been less and less — that means the market is taking the news pretty well, the selling pressure is lower. “It could also mean that the market thinks the worst is over for cryptocurrency and that the most negative news is now being priced in.”
US inflation data due on Thursday is expected to show that inflation has softened. Economists polled by Dow Jones expect the consumer price index to fall 0.1% month-on-month in December.
Inflation is still expected to rise 6.5% year-on-year, although that will be down from a 7.1% jump in November and well below June’s peak of 9.1%. Investors hope the cut could put pressure on the US Federal Reserve to reverse rate hikes.
The Fed and other central banks have raised interest rates over the past year in an effort to tame rising inflation, with moves that sharply undercut stocks and cryptocurrencies in 2022.
The hope now is that the central bank will cut interest rates by squeezing risk assets a bit.
“Today’s CPI numbers can be quite telling, and a hot CPI print can definitely throw a wrench in the works for risky assets like crypto,” Ayyar said.
Ayyar warned that one or another negative news in the cryptocurrency could cause the price of bitcoin to drop below $17,000, setting the stage for further declines and a potential drop in the digital asset to the $12,000-$14,000 range.
Bitcoin is down nearly 74% from its November 2021 all-time high of $68,990. Last year, roughly $1.4 trillion was lost from the cryptocurrency market as traders dumped risky assets like technology and growth stocks.
Bitcoin and the broader digital currency market also declined, indicating increased correlation with major stock indices such as the Nasdaq Composite.
The crash also caused crypto-specific problems, including the bankruptcy of projects and companies like FTX and Terra.
However, Bitcoin has started 2023 on a positive note and its price has steadily risen over the past 12 days.
Other digital currencies rose on Thursday’s jump in bitcoin prices. The second-largest coin, Ether, rose almost 5% to $1,397.78, while Binance’s BNB token gained 3% to $283.
Binance CEO Changpeng Zhao told CNBC on Wednesday that the exchange plans to increase hiring by 15% to 30% in 2023, unlike other exchanges that have cut jobs.
Binancey, which previously set aside $1 billion for a fund to support the industry after the collapse of FTX, has faced fears about the strength of its reserves. Auditor Mazars, which was working on the company’s so-called backup proof, stopped all work with crypto companies in December.
Binance says it has enough assets to cover liabilities.