Monday was the first time since mid-December that Bitcoin prices went over $17,000. This led to gains across all cryptocurrency markets, as traders bought into the space in hopes that the Federal Reserve will change its “hawkish” stance this year.
At 00:26 ET (05:26 GMT), the largest cryptocurrency had gone up 1.7% to $17,235.3. This was because the dollar was weaker after Friday’s nonfarm payrolls data showed that the U.S. job market was slowing. This means that the Federal Reserve has less room to raise interest rates quickly.
Ethereum, the second-largest cryptocurrency in the world, also hit a high not seen in more than three weeks. Its price went up 4% and went above $1,300 for the first time since mid-December.
The possibility that the Fed will raise interest rates more slowly is a big relief for the cryptocurrency market, whose value plummeted from 2018 to 2022 as the Fed’s monetary tightening undid two years of very easy policy for the space. This sudden drop in price also led to a string of well-known companies going bankrupt, which the cryptocurrency market is still trying to get over.
This week, the U.S. inflation data due on Thursday is also a big deal. If there are signs that price pressures are starting to ease, this could give the Fed more reason to stop talking like hawks.
But even though a less hawkish Fed would be good for Bitcoin, the cryptocurrency is trading at a small fraction of its highs in 2021. In 2022, the value of the cryptocurrency dropped by 65%, which called into question its status as a store of value, a currency, or even a hedge against inflation.
This sharp drop in value, along with a string of well-known crypto companies going bankrupt in 2022, has made retail investors less interested in cryptocurrencies in general.
The value of the space fell by more than two-thirds in 2022, and it has been hard for it to come back in the first week of trading this year.
Still, the past cycles have shown that cryptocurrency bull runs only happen when the government makes it easy for people to get money. With the Fed likely to stop being so “hawkish” this year and possibly stop raising interest rates later this year, crypto could get stronger in 2024.
But it remains to be seen if the space will be able to get back on its feet after a big blow to retail sentiment and a possible tightening of regulations.