After a couple of months with no clear trend, last week marked the largest upside in crypto since mid 2021. The Nasdaq Crypto Index (NCI) closed Sunday (01/15) 22.9% above its prior weekly close, led by a 23.3% rise in bitcoin (BTC) and a 22.6% move up for ether (ETH).
The week kicked off without major events, with BTC nearing $17,000, but on Wednesday the crypto market began its rally alongside the positive atmosphere in other asset classes. The spark in price may have been in part due to the news that El Salvador’s congress had passed a law allowing the issuance of bitcoin bonds, with the Central-American country—the first in the world to adopt BTC as legal tender—preparing the grounds for the first ever sale of BTC bonds by a sovereign state.
On Thursday, BTC’s price surpassed $18,000 for the first time since early December 2022, with ETH regaining the $1,400 level, a feat unseen in over two months. Some altcoins performed even better, in a rally that is also explained by a massive number of liquidations of short positions (a short squeeze) amidst fears that the ongoing situation involving the Digital Currency Group (DCG) could be getting worse.
Another factor having a positive impact on crypto was the release of the Consumer Price Index (CPI) for December 2022, slightly better than market expectations, with inflation in the US already showing a rolling 12-month figure of 6.5% versus 7.1% in the prior month. After a three-month streak of lower inflation, markets are steadily reassessing their expectations for the Fed's next interest rate hike, with some analysts already expecting a milder 25 bps increase for the next meeting.
On Friday, crypto continued its positive trend, with BTC moving above $19,000 for the first time since the beginning of November. On Saturday, BTC reached its weekly high of just over $21,200, going through a slight decline on Sunday, and closing the week just below $21,000. ETH reclaimed the $1,500 level, closing Sunday with its best weekly performance since mid 2021. Due to the higher network activity on Ethereum, ETH’s total supply has, once again, moved below its pre-Merge figure, with the token becoming net deflationary after four months of its successful transition to Proof-of-Stake.
For this week, investors are paying attention to the economic calendar, with retail sales in the US on Wednesday and unemployment claims on Thursday.
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