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Bitcoin heads toward best week since October as crypto collapse stabilizes

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The worth of bitcoin exceeded the edge of $66,895 in October for the primary time in history.

Chesnot | Getty Images

The value of bitcoin got a small relief bounce this week as investors hoped that the worst of the crypto liquidity crisis is over.

By Friday, bitcoin had risen 13.63% for the seven-day trading week starting Sunday, and was on pace for its best week since October, in line with Coin Metrics. The value rose as high as $22,478.37 at one point, climbing back from a low of about $17,000 in June.

It last traded lower than 1% higher on the day at $21,798.40, at 4:00 p.m. ET, in line with CoinMetrics.

“Plenty of the insolvencies and compelled unwinding from a volume perspective are behind us,” said Felix Hartmann, managing partner of Hartmann Capital. “Three Arrows filing for bankruptcy was form of the ultimate pin in that.”

Three Arrows, a crypto-focused hedge fund, filed for bankruptcy last week after a pointy decline in digital currency prices exposed a liquidity crisis on the firm.

The market contagion could spread into smaller crypto exchanges or funds, Hartmann added, but there are no greater, more impactful dominoes left to fall. If the crypto industry can go a month without bad news or insolvencies, he said, it’s “very likely” that that market could double.

Still, doing so would only lift bitcoin’s price back as much as April levels. It’s currently about 70% below its November all-time high of $68,982.20.

Looking for stability

Gritt Trakulhoon, lead crypto analyst at Titan, called bitcoin’s weekly rise a “much needed” short-term relief rally coming after a serious capitulation going back to May when Terra’s stablecoin project crumbled. Indeed, as digital currency prices tumbled and strained liquidity, crypto lenders and other firms have also suffered.

Having an unofficial lender of last resort like Sam Bankman-Fried to bail out among the embattled crypto lenders can also be providing relief to investors, Trakulhoon added. This week, the FTX CEO said he and his company still have a “few billion” available to shore up struggling firms that would further destabilize the digital asset industry.

Trakulhoon said $22,500 to $23,000 is the resistance level to look at for bitcoin. If it breaks above that threshold, it should rise “pretty quickly” to its next stop: $28,000, he added.

Ryan Shea, economist at Trakx, pointed to this week’s news that Federal Reserve officials said one other rate of interest hike of fifty or 75 basis points is probably going at their July meeting. That, combined with increasing signs that the U.S. economy is slowing more markedly than policymakers’ projections, is making investors view the Fed’s aggressive stance “with more circumspection,” he said.

“In effect, they’re searching through the hikes and as a substitute are focused on the expectation of eventual Fed capitulation, something that could be a positive scenario for crypto prices, and risk assets more generally,” Shea said.

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