Bitcoin and cryptocurrency prices have been under pressure in 2022, with traders feeling the effects of a series of major industry meltdowns.
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Bitcoin jumped above $22,000 on Monday, hitting its highest level in more than a month, as the cryptocurrency market harbored hopes that the contagion and market shakeout of the past few weeks is nearing its end.
The world’s largest cryptocurrency was trading at $22,135.30 as of 8:57 a.m. ET, according to CoinDesk data, up around 4%. Bitcoin has traded as high as $22,493.61 over the past 24 hours, its highest level since June 16.
Other cryptocurrencies also rallied, with Ether up more than 9% from its price 24 hours ago and Polygon’s MATIC token up 16%.
The bullish sentiment was supported by a rally in equity markets in Europe and Asia. US stock futures were also higher. Cryptocurrencies, especially Bitcoin, are closely correlated with stock market trading. Oftentimes, a surge in stocks will lift sentiment in the crypto market as well.
But investors are also watching to see if the carnage of the past few weeks, which has seen Bitcoin fall almost 70% from its all-time high reached in November and wiped billions of dollars from the market, could be over.
The price drop has brought the demise of several high-profile companies in the industry, most notably hedge fund Three Arrows Capital and crypto lender Celsius, both of which have filed for bankruptcy.
These collapses have spread contagion across the industry and have caused other related companies to come under pressure.
Much of this has been caused by the huge leverage and borrowing that has taken place in this last crypto cycle. Three Arrows Capital, for example, took out loans it couldn’t repay after the crypto meltdown. Celsius, which offered customers over 18% returns on depositing their digital coins, took on high-risk trading activities to earn the interest it was trying to return to its users.
Crypto companies have sold whatever assets they have to try to meet their liabilities, which has pressured the broader market.
Analysts say there are signs this contagion may be slowing.
“The market’s worst contagion is probably over, with the bulk of the forced selling behind us,” CryptoCompare research analyst David Moreno wrote in a research note.
Despite the rally, the crypto market is still suffering. Both bitcoin and ether are down more than 50% this year. Bitcoin’s second quarter was its worst quarter in more than a decade.
Analysts are still not convinced of any significant move higher in the near term.
“In view of the strongly negative performance in the second quarter, it is not surprising that there was a ‘leap of relief’. We believe the market will remain range bound in the coming months,” Moreno said.