The U.S. dollar dropped on Friday, and stocks rose at the same time, helping Bitcoin rise, pushing again above the $20,000 level.
The biggest cryptocurrency in the world was last trading 10% higher at $21,268.25, up from its lowest level since mid-June earlier this week when it dropped below $19,000.
Ether, which increased by about 5%, was among the other digital currency that were higher. The value of the entire cryptocurrency market surged back over $1 trillion.
The U.S. dollar, which has witnessed a phenomenal surge this year, has somewhat weakened, which has prompted the latest move upward for bitcoin. On Friday morning, the U.S. dollar index, which compares the dollar to a basket of other currencies, was down around 1%.
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U.S. market indices ended the day Thursday with gains, while Friday saw gains in futures. Bitcoin and U.S. markets have a strong relationship, frequently rising in tandem with stock indices. When the dollar declines, Bitcoin likewise tends to increase.
Since June, Bitcoin has been fluctuating between $18,000 and $24,000 and has been unable to break this pattern.
A “bearish retest” of the $22,500 to $23,000 price range, according to Vijay Ayyar, vice president of business development and international at cryptocurrency exchange Luno, may have occurred on Friday.
Therefore, Ayyar continued, “I would still say this is a negative rally that might see more range and lower unless it breaks that level firmly and closes above.
Since the Federal Reserve quickly raised interest rates in November, risk assets like cryptocurrencies have been hammered and are now more than 60% below their record high.
The cryptocurrency market has also been affected by failed initiatives and well-publicized bankruptcies that have affected the entire sector.
Ethereum “merge,” inflation in the spotlight
The merge, a significant network upgrade to Ethereum that its supporters claim will increase the blockchain’s efficiency, has been anticipated by the cryptocurrency markets. By the middle of September, the integration should be finished. The cost of ether, the native token of Ethereum, has greatly surpassed bitcoin in the week leading up to the event.
When the U.S. Consumer Price Index is released the following week, financial markets will also be looking for indications of a slowing rate of inflation. Investors are also watching for clues about the Fed’s rate hike trajectory.
Jerome Powell, the chair of the Fed, stated on Thursday that he is “fully committed” to battling inflation, indicating that additional rate increases may be forthcoming.
Yuya Hasegawa, a cryptocurrency market analyst at the Japanese cryptocurrency exchange Bitbank, predicted that bitcoin might test the $22,000 level if inflation slows down and there is excitement surrounding the Ethereum merger. However, she also issued a warning.
As Hasegawa noted in a note on Friday, “too much optimism could be dangerous given what some Fed members, including chair Powell, said this week.”
