Digital assets have sprung to life in the past week, despite ongoing concerns a looming recession may place higher valuations on hold in traditional markets.
Bitcoin is up more than 23% from weekly lows of around $17,100 to $21,350 placing the average holder and mining operations back into the black. Its price is now trading at three-month highs.
The crypto’s clean break above $19,000 on Friday led to a continuation in price action for digital assets across the board. It’s worth noting the rally is beginning to weaken courtesy of overbought conditions.
“To date, the 2022-23 bear market has spent 179-days below the Realized Price, making it the second-longest duration across the last four bear cycles,” data analytics firm Glassnode said in a newsletter on Monday.
Realized price in crypto refers to the value all BTC was bought for divided by the amount in circulation.
There are notable similarities in market strength to 2019’s bear market despite bitcoin having yet to ascend beyond $22,400 for long-term holders (155 days or more) of the asset when viewing in Realized Price, Glassnode said. Breaking above $22.4k would place long-term holders back into profit.
With the crypto now trading at highs not seen since before the collapse of FTX, miners are also experiencing reprieve after suffering from several market routs in 2022.
The recent rally in digital assets has led to outsized gains for many miners’ stock valuations, including Hive Blockchain and Marathon Digital which jumped 31% and 37% last week on reports of easing inflation.
A drop below $17,000 could put miners — many of whose stock valuations had plummeted considerably in recent months — back on notice.
Investment product inflows and lingering fears of a recession
Digital asset investment products saw minor inflows totaling $9.2 million last week alongside low trading volumes of around $866 million, digital asset trading group CoinShares said in a report on Monday.
The industry’s price appreciation has resulted in a weekly gain of 13% in assets under management — the largest in 14 months. Ether has also shrugged off eight weeks’ worth of outflows, with an inflow of $5.6 million coming off the back of a favorable shift in trader sentiment, CoinShares said.
An attitude toward risk-on assets, such as crypto, has been guided by a boon in sentiment for traditional equities in recent weeks — also witnessed across Asia-based markets.
Stocks trading in China and Hong Kong closed in the red on Monday following announcements of less than favorable growth in economic activity last year. Crypto has followed suit, with bitcoin stalling near a peak of $21,600 on the day, before falling back to current prices.
The tightly controlled nation’s economy grew just 3% last year, clocking its second-slowest run in almost 50 years. Still, China’s shift away from its COVID-19-zero policy earlier this month has some analysts anticipating a stronger-than-expected recovery this year as the country begins to reopen to the world.
Quarterly and monthly economic data have continued to exceed analyst expectations as the country eyes a recovery, CNBC reported Tuesday. That could lead to a rebound in Asia-based equities and a chance for increased capital to flow to risk-on assets such as bitcoin, despite a heavy ban on digital assets being in place since November 2021.
Fears of a looming recession could put any hope of a stronger return to last year’s pricing for digital assets on hold, with many business leaders predicting global growth to slow considerably over the coming 12 months, Bloomberg reported.
Some macro analysts, such as Andy Constan of Damped Spring Macro Research, are skeptical that the Federal Reserve can engineer a hoped for ‘soft landing,’ and avoid a recession. Consequently, Constan is short both stocks and bonds, he told Blockworks’ Forward Guidance podcast last week.
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