February 4, 2023

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Bitcoin Rises Above $21,000 Amid Inflation Optimism, FTX

(Bloomberg) — Bitcoin rose more than $21,000 on Saturday on optimism that it may have bottomed out and inflation may have peaked.

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The largest cryptocurrency rose 7.5% to $21,299. It hasn’t been higher than $20,000 since November 8, and Saturday marked its 11th straight day of progress. The second largest ether rose as much as 9.7%, and other tokens such as Cardano and Dogecoin also posted strong gains. The total market capitalization of the crypto world has risen above $1 trillion for the first time since early November, according to data from CoinGecko.

The gains came amid a report on consumer prices last week that showed inflation eased in January from December levels. The Fed is on track to shift to lower rate hikes after this further slowdown, though it will likely continue to rise until price pressures show more definite signs of slowing. That helped boost risky assets like the Nasdaq 100, which has posted gains for six straight days.

“Crypto assets performed well after the soft CPI print, which indicates that the cryptocurrency’s macro correlation is not going away anytime soon,” said Sean Farrell, Head of Digital Asset Strategy at Fundstrat. “Following the price action this week is definitely encouraging,” and barring any forced liquidations from troubled crypto firm DCG “there is a high probability that the absolute bottom will be in cryptocurrency prices.”

Bitcoin price was stuck in a tight range between $16,000 and $17,000 for weeks before this latest breakout. The bullish move has caught short positions by surprise — cryptocurrency shorts have topped $100 million in five of the past six days, according to data from Coinglass. It had the highest Saturday gross, at over $296 million.

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Hayden Hughes, CEO of social trading platform Alpha Impact, said in a Saturday message. “The markets have a lot of positive momentum heading into the next FOMC meeting later this month.”

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