Bitcoin snaps slide as broader risk rally helps to temper rout

Bitcoin snapped a five-day slide as a late rally in US equities suggested that investors were retaining some degree of risk appetite following the recent rout in global markets.

The most popular cryptocurrency rose as much as 6.2 per cent to $US37,548 ($52,434) as of 4:36pm in New York. It fell to $US32,970 earlier, the least since July. Ether also climbed about 1.7 per cent to $US2463 after touching its lowest price since July.

The late uptick in crypto prices mirrored gains in the US stock markets. The 40-day correlation coefficient for the digital token and the tech-heavy Nasdaq 100 has reached almost 0.66, the most in data compiled by Bloomberg since 2010. A similar correlation with the S&P 500 is at a record too.

Cryptocurrencies has come under widespread selling pressure in recent weeks, with traders pointing to hawkish signals from the Federal Reserve and a selloff in technology shares as reasons for traders to withdraw from risky assets. Since its all-time high of $US69,000 in November, Bitcoin has tumbled more than 50 per cent.

Bitcoin and Ethereum will likely lead the broader crypto market out of its comedown, according to Bill Barhydt, chief executive officer of crypto trading platform Abra. Mr Barhydt said that indications show that Bitcoin is at or close to a bottom.

Some analysts have suggested that bottom is $US30,000, where Bitcoin could reach a support level if it continues to fall going forward. Wilfred Daye, head of Securitize Capital, the asset-management arm of Securitize, said $US30,000 is psychologically important, and Bitcoin should find some support there. But, he adds, should the selloff continue beyond that to $US27,000 “miners who got in at beginning of the bull market will be in trouble.”

Kenny Polcari, managing partner at Kace Capital Advisors, said that tech stocks, and therefore cryptocurrencies, could turn red again with the Fed meeting this week.

“Tech stocks and the broader market is still in for turbulent times. Bitcoin and cryptos will continue to get dragged into it,” Mr Polcari said. “Do I think it’s going to be a disaster? No.”

Bloomberg