The world’s premier digital currency has started this week with a spring in its step. Crypto prices have mirrored the year-to-date declines for equities and bonds. But the risk mood has brightened over the last few trading sessions as economic data has softened and a potential pause in the US Federal Reserve interest rate tightening cycle plays out after the summer. The $30k marker in Bitcoin has been pierced so bulls will look to push prices out of the recent range which has held since mid-May.
Bitcoin had posted nine straight weeks of losses, something which had never been seen before in its history. That said, prices have tracked sideways for a number of sessions even if the weekly closes have been in the red. Global equity markets have been in a similar funk with the S&P500, the blue-chip US equities index, last week snapping a seven-week losing streak. The jump of over 6% on the week was also its best showing since November 2020, ending its longest run of weekly losses since 2001.
Renewed optimism in risky assets was also helped yesterday by the news that China may have finally managed to contain its latest Covid outbreak after Beijing said it may relax restrictions and ease more virus curbs in Shanghai and other parts of the country. A reopening of the economic hubs in China would be a boon to the global economy and the supply chain issues that have wreaked havoc on the economic activity and growth.
The potential for a ten-week losing streak in bitcoin would certainly grab some headlines. So, to end its nine-week losing run, prices need to close at least above $29,500. The mid-May highs around $31.418 will offer initial resistance for a more protracted move higher. Above here the January low at $32.933 should offer next resistance.
On the flip side, we note that its was a US holiday yesterday so volumes across financial markets were thin. Questions are therefore being asked as to whether higher levels will have the bid interest required to cement themselves as new support. There is a CME futures gap from Friday at $29,000 which could provide a target on the downside. Last week’s low at $28,000 will also act as support, but that is the last real level before the spike low earlier in the month at $25,338.
Wall Street’s fear gauge, the CBOE VIX index, still remains above its long-term average around 20. This suggests the ongoing concerns around global growth and the chance of a recession continue to linger. But especially if the Friday’s US labour market data and non-farm payrolls figures don’t show increased sings of a very tight labour market, and with it more aggressive Fed tightening, then cryptos can continue the advance north.