Bitcoin prices climbed recently, moving toward the $40,000 level.getty
Bitcoin prices have rebounded recently, climbing more than 4% within 24 hours and then retaining most of their gains.
The world’s largest digital currency by market value rose to as much as $39,446.80 earlier today, according to CoinDesk data.
The cryptocurrency increased to this value after falling to roughly $37,700, its lowest in several weeks, the night before.
After climbing to its intraday high, the digital asset experienced some volatility, falling below $38,500 but then recovering to more than $39,000.
At the time of this writing, the cryptocurrency was trading close to $39,250, very close to its intraday high.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
When it came to explaining bitcoin’s recent gains, several analysts offered input on the matter, identifying several potential causes of this appreciation.
Bitcoin’s Recent Relationship With Stocks
Many of these market observers emphasized the notable correlation between stocks and bitcoin.
When asked whether gains in equities were helping fuel the digital asset’s recent price appreciation, Joe DiPasquale, CEO of cryptocurrency hedge fund manager BitBull Capital, offered a concise reply.
“Yes, correlation with stocks is currently driving Bitcoin’s price,” he stated.
Tim Enneking, managing director of Digital Capital Management, also weighed in, saying that “the correlation between equity markets and BTC is at an all-time high.”
He described the situation as being unfortunate, “because, historically, the lack of such correlation was one of the main reasons for purchasing BTC (or virtually any cryptocurrency, for that matter).”
Ben McMillan, CIO at IDX Digital Assets, also commented on the relationship between bitcoin and equities, although he focused specifically on the shares of tech companies.
“The key story with bitcoin price continues to be its correlation with tech stocks (which is at all-time highs),” he stated.
“As a result, the slate of tech earnings we’ve seen this week have been driving the daily trading in bitcoin,” said McMillan.
Further, he noted that “the quarterly reports coming out this week have been directly contributing to the price action we’re seeing in Bitcoin.”
Broader Market Developments
Some analysts offered differing explanations, citing a range of factors when explaining bitcoin’s latest price movements.
“Treasury yields, credit, relative dollar strength (against global fiats), and legacy market volatility are telling the story right now,” said Dylan LeClair, head of market research for Bitcoin Magazine.
“The bitcoin chart is a function of these markets,” he stated.
Josh Olszewicz, head of research at Valkyrie Investments, also identified multiple variables as driving the digital currency’s recent price action.
“The significant intra-day volatility has mostly been driven by the Nasdaq and bitcoin correlations, as well as further Hawkish comments by Fed chair Jerome Powell,” he stated.
“Earnings reports throughout the week have also added to pre and post US legacy hours volatility,” Olszewicz added.
“Additionally, crypto markets have been highly sensitive to Elon’s Twitter acquisition announcements, likely in the belief of increased digital asset-connectedness to the platform in the future,” the expert stated.
Anthony Denier, CEO of trading platform Webull Financial, took a more simplified approach, claiming that while bitcoin and stocks often move together, the digital currency’s recent gains were a result of investors’ desire for risk-on assets.
Going forward, the current market conditions could prove highly favorable for bitcoin prices, said LeClair.
“So far in 2022, Bitcoin has essentially acted as a 24/7 inverse VIX (S&P 500 volatility index). Bitcoin stackers and HODLers are accumulating, while Wall Street risk shops are de-risking,” he stated.
“Correlation will likely remain strong for the time being as a de-leveraging of the global everything bubble takes place,” the analyst predicted.
“Bitcoin is primed for vast outperformance following the reversal of hawkish central bank policy, based on accumulation data and very risk off derivative markets,” he concluded.
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and sol.