29th May 2023 – (New York) Bitcoin, the largest digital token, climbed as much as 3.2% on May 29 to reach its highest level in more than two weeks. The cryptocurrency was trading at US$28,182 as at 9.32 am Singapore time, oscillating around its 50-day moving average. Smaller tokens, ranging from Ether to Binance Coin, also posted gains.
The recent deal between President Joe Biden and House Speaker Kevin McCarthy on raising the US debt limit has helped boost investor sentiment. However, the agreement still has to clear Congress quickly to avert a US default. A recent increase in Treasury yields and bets on more US monetary tightening are other potential headwinds.
“This morning’s positive risk sentiment directly relates to the resolution of the debt-ceiling impasse,” said John Toro, head of trading at digital-asset exchange Independent Reserve. “Front-end funding costs remain highly elevated relative to crypto returns, resulting in negative carry for long holders. This will continue to prove a headwind for risk assets and the crypto complex.”
Bitcoin is on a five-day streak of gains, its best stretch since March. The cryptocurrency has been facing a challenging quarter due to poor liquidity and a US crackdown. Crypto markets have partially rebounded in 2023 from a rout last year that led to blow-ups such as the collapse of the FTX exchange. However, they remain well off record highs, including Bitcoin’s all-timepeak of almost US$69,000 in 2021.
Tommy Honan, head of market analysis at crypto exchange Swyftx, believes that the relief of a debt deal could bring traders back to the table and trigger the next big leg-up in the price of Bitcoin.
Despite the recent gains, Bitcoin still faces significant headwinds. The cryptocurrency market is highly volatile, and its price can fluctuate wildly in a short period. Investors in Bitcoin and other cryptocurrencies must be prepared to deal with the risks involved.