- Bitcoin flirted with levels around $42,000 on Monday, its highest point since April 2021.
- The broader crypto market moved higher in line with Bitcoin.
- Coinbase Institutional research expects the positive mood to last as the economic outlook improves.
Crypto markets were in the green on Monday as Bitcoin reached levels last since before the collapse of the Terra ecosystem in 2021. Bitcoin flirted with levels around $42,000. Coinbase analysts said an improved economic backdrop is benefiting crypto markets.
The recent rally in crypto prices has more to do with macroeconomic factors than the anticipation of a spot Bitcoin exchange-traded fund being approved in the US, according to Coinbase.
The latest economic data out of the US has piqued the interest of bulls and sent the market into risk-on mode, Coinbase Institutional analysts David Duong and David Han said on Friday.
Risk-on means investors are willing to take on more dangerous bets to achieve desired returns.
Data suggest the US is “in the proverbial ‘soft landing’ scenario of cooling inflation and stable economic activity,” Duong and Han wrote.
A soft landing refers to a central bank, in this case the US Federal Reserve, managing to bring inflation down while avoiding a significant decline in economic activity or a shock.
A soft landing likely means the Fed will begin cutting interest rates from mid-2024, Coinbase said. Lower interest rates benefit risky assets like Bitcoin as traders look to take more risks.
Prices will continue to rally through to the end of the year if certain conditions are met.
If US jobs data for November, slated for release on Friday, doesn’t serve up any surprises and if inflation the following Tuesday follows estimates then expect investors to remain risk-on, Coinbase said.
There has been a continued focus on Bitcoin in 2023, as opposed to other years where crypto prices have soared.
In 2021 when crypto prices reached record highs, Bitcoin became less dominant. This year its dominance has grown.
Dominance refers to the market capitalisation of Bitcoin relative to the total global crypto market capitialisation.
When Bitcoin reached a record high around $69,000 in 2021, its dominance dropped to 39% from 67%. This year it has increased to 53% from 41%, according to Coinbase’s report.
The crypto exchange has also seen “new institutional inflows into the crypto space,” the report said.
This mirrors increased activity on traditional venues offering crypto services to pro traders, such as the CME.
The value of open interest of Bitcoin futures on the CME reached a record volume this month. Open interest on the CME is around $4.5 billion now, higher than the $4.3 billion seen in November 2021.
Open interest refers to the number of outstanding contacts trading on an exchange at a given time.
The amount of outstanding contracts of Bitcoin futures on the CME reached a record last month, above 110,000.
Crypto market movers
- Bitcoin traded around $41,300, up 4.3% over the past day.
- Ethereum gained 3% to trade above $2,200.
What we’re reading
- Bitcoin bears hit with $85m in liquidations as price soars — DL News
- Understanding crypto hacks and exploits with DefiLlama — DL News
- Platypus Hackers Walk Free After $8.5 Million Crypto Hack — Milk Road
- El Salvador’s Bitcoin Investment In The Green, Nayib Bukele Slams Critics — Milk Road
- Should You Buy Bitcoin? All You Need to Know After Token Hits $40,000 — Bloomberg
Adam Morgan McCarthy is DL News’ London-based Markets Correspondent. Got a tip? Reach out at email@example.com.