XRP surged as much as 16% in the past 24 hours as bitcoin topped the $21,000 level, and the largest cryptocurrencies showed signs of recovery after a steep fall last week.
Solana’s SOL token jumped 8% after the development team announced the crypto-native Solana mobile phone at an event in New York yesterday. Avalanche’s AVAX rose 8%, extending Thursday’s gain as the project introduced a native bridge to the Bitcoin network. Polygon’s MATIC added to Thursday’s run with a 17% increase.
Bitcoin (BTC) passed through the $21,000 level in European afternoon hours, adding to a steady recovery since last weekend’s plunge to almost $18,000. Current levels have acted as a resistance zone for the largest cryptocurrency by market cap, and a recovery above $21,000 could see the asset surge to $22,600.
Bitcoin has seen selling pressure in the past week amid systemic risks from within the crypto market, such as crypto lenders pausing withdrawals and the blow-up of prominent crypto fund Three Arrows Capital, which owes creditors hundreds of millions of dollars in bitcoin and other cryptocurrencies.
Friday’s recovery came as broader equity and bond markets rallied. Stocks in Asia gained, with Hong Kong’s Hang Seng increasing 2.09%, and the Shanghai Composite and India’s Sensex ending the day up 0.89%. The Stoxx Europe 600 gained 1.49% in midday trading, while futures in the U.S. added at least 0.50%.
On Thursday, U.S. Federal Reserve Chair Jerome Powell said the agency’s commitment to reining in inflation, which is now at a 40-year high, was “unconditional,” adding that he expected economic growth to pick up in the second half of the year after a sluggish start to 2022, as per Reuters.
While Powell’s comments indicate higher interest rates may be in the offing, Jeffrey Halley, a senior market analyst at foreign exchange broker Oanda, told clients in a note that markets continued to price in “a recession stopping rate hikes in their tracks much sooner.”
Goldman Sachs and Morgan Stanley reiterated warnings earlier this week, stating that recession risks were “not fully priced in” by investors. Citi pegged the possibility of a recession at 50%.
“The moves this week could still turn out to be the result of a financial market genetically preprogrammed to buy dips in equity and bond prices, thanks to two decades of central bank largess,” Halley said. “It could also be a bear market correction as the stampede for the exit door got overdone in the short term, leading to a short-squeeze.”
Powell’s comments came as investors remain spooked by concerns around inflation and supply-chain stresses. Last week, the Fed increased rates by 75 basis points, the most in 28 years, in a move that sought to curb inflation. A further 50-to-75 basis point hike is expected in July.
Meanwhile, crypto traders remain cautious of the current market reversal. “It will be too early to talk about a long-term reversal,” FxPro’s Alex Kuptsikevich told CoinDesk earlier this week. “All negative fundamentals remain. Until sharp monetary-policy tightening becomes the norm, financial market pressures can quickly negate bounces in cryptocurrencies.”