Bitcoin (BTC) rose above $28,000 on Tuesday afternoon as investors responded to mildly encouraging first-quarter earnings reports from tech giants Alphabet and Microsoft, as well as the liquidation of a number of Bitcoin short positions. The largest cryptocurrency by market capitalization was recently trading over $28,250, up 2.8% in the past 24 hours. BTC had traded sideways most of Tuesday before its surge shortly after U.S. equities markets closed.
BTC’s late surge came as Google parent Alphabet and Microsoft both slightly surpassed analysts’ expectations, and data from analytics firm Coinglass showed that some $11.3 million of BTC short positions had been liquidated since 4 p.m. ET. These types of short squeezes have historically tended to accelerate price jumps.
Ether (ETH), the second-largest cryptocurrency by market value, followed a similar pattern and rose 1.8% to change hands at around $1,869. ETH slid as low as $1,804 on Tuesday morning, according to CoinDesk data.
While BTC and ETH both saw gains, major equity indexes closed in the red Tuesday afternoon, a day after embattled First Republic Bank (FRC) said in its quarterly results that it had lost $100 billion in deposits, renewing anxiety about regional banks. Last month, Silicon Valley and Signature banks both imploded. On Tuesday, First Republic’s shares plummeted almost 50%.
The S&P 500 and the tech-heavy Nasdaq Composite closed down 1.5% and 1.9%, respectively, while the Dow Jones Industrial Average (DJIA) was down 1% for the day.
In bond markets, the yield on the two-year Treasury note sank 19 basis points to 3.94%, while the 10-year Treasury yield dropped roughly 11 basis points to 3.40%.
“This deep into earnings season, it seems the outlook isn’t too bad, and that should mean the [Federal Reserve] can stay on their tightening course with the risks of a June hike still remaining on the table,” Edward Moya, senior market analyst at foreign exchange market maker Oanda, wrote in a Tuesday note.
“After this round of earnings and the latest consumer confidence report, the one thing that everyone can agree upon is that personal consumption is going to be a lot weaker going forward,” Moya added.
What’s driving Bitcoin’s surge?
While Bitcoin’s recent rally may be partly attributed to encouraging tech earnings and short liquidations, other factors are also at play.
One of these factors is the ongoing institutional adoption of Bitcoin, with major companies such as Tesla, Square, and MicroStrategy investing billions in the cryptocurrency. In addition, the approval of a Bitcoin ETF by the SEC is seen as a significant catalyst for Bitcoin’s future growth.
Another factor driving Bitcoin’s rally is the increasing interest in cryptocurrency from retail investors, who see it as a potential hedge against inflation and currency devaluation. With governments around the world continuing to print money to fund stimulus programs and bailouts, many investors see Bitcoin as a way to protect their wealth from the potential erosion of fiat currencies.
Finally, the upcoming Bitcoin halving, which is scheduled to take place in 2024, is also driving speculation around Bitcoin’s future price. The halving will reduce the amount of new Bitcoin mined each day, making the cryptocurrency more scarce and potentially driving up its price.
What’s next for Bitcoin?
While Bitcoin’s recent surge is certainly encouraging for investors, there are still significant challenges that the cryptocurrency faces. One of the biggest challenges is regulatory uncertainty, with governments around the world grappling with how to regulate cryptocurrencies and protect consumers from scams and fraud.
In addition, Bitcoin’s price rebound may have also been boosted by a recent announcement by El Salvador's President Nayib Bukele. On Monday, Bukele announced that the country will officially adopt Bitcoin as a legal tender alongside the U.S. dollar. This move is aimed at promoting financial inclusion in the country where more than 70% of the population do not have access to traditional banking services. This makes El Salvador the first country in the world to adopt Bitcoin as a legal tender.
The announcement was received positively by the cryptocurrency community, as it is expected to pave the way for other countries to follow suit. The move could also increase the adoption of Bitcoin and other cryptocurrencies in the country, as more businesses start accepting it as a form of payment.
Bitcoin's price has been volatile in recent months, with the cryptocurrency experiencing sharp price drops in May and June, after reaching an all-time high of nearly $65,000 in April. The price drop was partly due to China's crackdown on Bitcoin mining and trading, which caused a significant decline in the cryptocurrency's hash rate.
However, Bitcoin has since recovered from the price drops, and its price has been relatively stable in recent weeks. The cryptocurrency's price rebound is also partly due to increased institutional adoption and acceptance of Bitcoin as a legitimate asset class. In recent months, major companies such as Tesla, Square, and MicroStrategy have announced significant Bitcoin purchases, further legitimizing the cryptocurrency.
Overall, Bitcoin's price rebound to over $28,000 amid mildly encouraging tech earnings and the liquidation of short positions is a positive sign for the cryptocurrency market. While the market remains volatile and subject to various external factors, such as regulatory uncertainty and market sentiment, the increased adoption and acceptance of Bitcoin and other cryptocurrencies by both institutional and retail investors suggest that the future of the cryptocurrency market is bright.
It is important to note that the above article is not intended as financial advice and should not be interpreted as such. Cryptocurrency investments are inherently risky and should only be undertaken after careful consideration of personal financial circumstances and risk tolerance. As with any investment, it is crucial to conduct thorough research and seek professional advice before making any investment decisions.
