Bitcoin is surging in chaos, breaking the $28,000 mark for the first time since June.
The largest digital asset surpassed $28,000 for the first time since June 2022, trading at $28,258 on Sunday. Since the beginning of the year, Bitcoin's price has increased by about 70%. Ethereum is up about 17% since the beginning of last week, along with so-called altcoins like Solana and Cardano.
Traders faced a high degree of uncertainty in the markets last week. US two-year bond yields were extremely volatile, with the CBOE Volatility Index, a measure of fear, also known as the VIX, rising above 30. But bitcoin is stable – and straightforward.
“Bitcoin is tied to liquidity conditions and real interest rates. Real interest rates have fallen, liquidity conditions have expanded, and it seems we are entering a new regime," said Ilan Zolot, Marex's co-head of digital assets.
Widespread market volatility over the past week followed the bankruptcy of a number of US lenders and renewed concerns about Credit Suisse Group AG, before UBS Group AG agreed to buy a Swiss bank on Sunday. After that, some investors called on the Federal Reserve to stop raising interest rates. But midweek data showed that the core CPI came in higher than expected, a reminder that the fight against inflation is far from over. It's unclear how the central bank will react to the mixed signals at this week's Fed meeting.
This uncertainty has plagued many parts of the financial world, but emboldened bitcoin bulls, who see the digital asset as a hedge against inflation over the past year, despite evidence to the contrary. In 2022, a series of bankruptcies and scandals dropped Bitcoin's price by more than 60%.
Tokens have also surged despite internal disputes in the digital asset space. USD Coin temporarily lost its peg to the dollar this month, prompting the US Securities and Exchange Commission to double down on its belief that most digital assets qualify as securities.
The S&P 500 fell 1.1 percent on Friday. If Bitcoin traded like it will in 2022, the token would crash alongside US stocks. But this month, the correlation between digital assets and the SandP 500 disappeared.