Bitcoin continues to trade in a tight range of $18,000 to $25,000, leaving investors nervous about where the price will go next. The crytpo market has been plagued with a number of problems from collapsing projects to bankruptcy.
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Bitcoin hit a high of $20,000 on Tuesday, hitting a high in more than a week, but is still struggling to break out of its tight trading range.
According to data from CoinDesk, the world’s largest cryptocurrency was 7% higher at $20,265.95 around 3:30 a.m. ET, according to data from CoinDesk.
Bitcoin’s rally has raised the bar for the broader crypto market. Ether was up about 7% at $1,389.75.
However, bitcoin has struggled to find direction, trading between $18,000 and $25,000 since mid-June after a crash that saw nearly $2 trillion wiped out the entire money market. electronics since peaking in November.
That market decline was driven by interest rate hikes from central banks aimed at controlling rampant inflation as well as wave of bankruptcy and insolvency problems filtered through the cryptocurrency industry.
Cryptocurrency investors have been keeping an eye on monetary policy as digital currencies have been closely correlated with the US stock market this year. Higher interest rates put pressure on S&P 500 and high technology Nasdaqfiltered through other risky assets including cryptocurrencies.
The The US Federal Reserve’s 0.75 percentage point increase in interest rates last week marks a “major event” for the crypto market, according to Vijay Ayyar, vice president of international and corporate development at crypto exchange Luno.
“This is generally in line with market expectations and as such, we have seen a lot of that sentiment priced in,” Ayyar said.
Interestingly, bitcoin’s rally, which began on Monday, happened despite a drop in US stocks with the S&P 500 index closing at a 2022 low. Stock Futures Rise on Tuesday. So there are signs that perhaps the correlation between cryptocurrencies and stocks may be weakening.
Meanwhile, investors are keeping a close eye on the US dollar. The dollar index, which tracks the greenback against a basket of currencies, is up more than 18% this year. Bitcoin moves inversely with the dollar, so a strong greenback is negative for bitcoin. However, Ayyar says that the dollar index could be close to peaking, which would mark a potential bottom for bitcoin. That could be one reason behind bitcoin’s spike.
“Traders can also position themselves accordingly,” Ayyar said.