Bitcoin continued its second day of gains on Tuesday by rising above the $21,000 mark. The surge in the Bitcoin price came as traditional financial firms Goldman Sachs (GS) and Morgan Stanley (MS) said in client notes that recession fears were “not fully priced in.”
According to Morgan Stanley, “The bear market will not be over until recession arrives or the risk of one is extinguished.”
Goldman analysts stated that stock traders had priced in a mild recession, “leaving them exposed to a further deterioration in expectations,” according to Bloomberg.
Some cryptocurrency analysts like Alex Kuptsikevich of FxPro said that Bitcoin managed to stay above the $20,000 level on Monday amid weak trading activity because of the U.S holiday.
Kuptsikevich was however not convinced of a continued rally. “It will be too early to talk about a long-term reversal: All negative fundamentals remain. Until sharp monetary-policy tightening becomes the norm, financial market pressures can quickly negate bounces in cryptocurrencies,” he said.
Last weekend, the Bitcoin price fell below the $20,000 mark, a move that marked a decline below the previous highs for the first time in the history of the cryptocurrency. The fluctuations in the BTC price over the weekend left Bitcoin holders counting losses worth $7.3 billion.
The rise in the Bitcoin price on Tuesday helped cryptocurrency majors to recover from their losses. At the time of writing, the Bitcoin price was about $21,396, having risen by about 3.30% in the past 24 hours. This is according to data obtained from cryptocurrency exchange platforms like Coinbase, Binance, and CoinMarketCap. The following BTC to USD chart shows the changes in the BTC value in the last 1 day.
Ethereum has also gained in the past 24 hours, having risen by 3.24%. At the time of writing, the Ethereum price was about $1,169 on Coinbase, Binance, and Coin Market Cap.
Solana’s SOL hiked by about 8.54% in the past 24 hours after an increase in transaction number.
Layer 1 tokens such as Polkadot’s DOT and Avalanche’s AVAX rose by 3.44% and 4.18% respectively. The total cryptocurrency market cap was about $939 billion on Monday. This is according to data obtained from CoinMarketcap.
The relief in cryptocurrency prices started late on Sunday following volatile trading over the weekend as the macroeconomic market conditions fluctuated.
Investor sentiment around digital assets like stocks and cryptocurrencies has increased in recent weeks amid the rising inflation. The U.S Federal Reserve has also raised concerns about a prolonged economic contraction.
Jerome Powell, the U.S Federal Chair, increased interest rates by 75 basis points last week, the highest increase in 28 years as the agency seeks to counter inflation.
Meanwhile, cryptocurrency observers are worried about the current relief in the cryptocurrency market.
“Everybody kind of feels that Bitcoin needs to wash out and take out all the short positions,” said Chris Terry, vice president at SmartFi lending platform. “This would be probably the full 80% retracement, which is typical in the markets, which would be down in the $12,000 to $13,000 range.”
Lily Zhang, the chief financial officer at Huobi cryptocurrency exchange, said that the group is “long-term bullish on crypto” but has concerns in the short term.
“Our market indicators show that there is an unprecedented level of fear, uncertainty, and doubt in the market,” said Zhang. On-chain liquidations may trigger a cascade of drawdowns as the market sees a large wave of capitulations.”
However, Zhang stated that such dynamics could allow cryptocurrency investors to take advantage of an “undervalued market.”