Bitcoin rises to $26,500, boosted by ECB and macro data

The cryptoassets market is remaining strong. Bitcoin (BTC) has continued its climb in the last 24 hours and is above $26,500, while Ethereum (ETH) also showed signs of strength and is consolidating at $1,600.

After Monday's bump, the price of cryptocurrencies has been slowly recovering this week. Investors are still pondering the effect that the liquidation of FTX's $3.4 billion in cryptoassets will have on the market, although the latest moves seem to prove right those analysts who warned that we were dealing with an overreaction after the news broke. Meanwhile, market participants are still awaiting updates on spot BTC exchange-traded funds (ETFs), which are not expected to be approved until mid-March 2024.

What has caused prices to rally? According to analysts, the European Central Bank (ECB) had a lot to do with it. Yesterday, the community supervisor raised interest rates by 0.25% to 4.5%, their highest level in the last 20 years. The deposit rate has risen to 4% and the lending rate to 4.75% after the tenth consecutive increase by the Frankfurt-based body, which took the opportunity to raise the inflation forecast and lower the growth estimate for the eurozone.

However, the market reacted well to this "anticipated" move as it interpreted the move as a dovish hike. In other words, as the ECB itself assured in its statement, "the key ECB interest rates have reached levels that, maintained for a sufficiently long duration, will make a substantial contribution to the timely return of inflation to the target." In other words, the supervisor could keep rates at these levels for a while, but this would have been its last hike.

Neil Wilson, head of analysis at Markets.com, stressed that "this is a clear and deliberate signal to the market that the ECB thinks it is done for now and we have reached the peak in rates." However, some strategists, such as those at ING, believe that the body chaired by Christine Lagarde "would be crazy" to completely rule out further hikes. "The meeting still leaves the possibility of resuming hiking at a future stage," they assured from the Dutch bank, although they believe this scenario is "very unlikely."

Likewise, the latest macroeconomic data have also favored the crypto rally. On the one hand, the producer price index (PPI) in the United States stood at 1.6% year-on-year in August, compared to 0.8% in the previous month, as published on Thursday by the US Bureau of Labor Statistics. The advance is higher than anticipated by the consensus, which expected it to remain at 1.2%. On the other hand, retail sales (up 4.6%) and industrial production for August (rebounded 4.5%) in China were better than expected.

"These successive rises this week for Bitcoin coincide with a noticeable return in investor sentiment. According to data provided by CryptoQuant, the number of open interests for Bitcoin derivatives has risen to its highest levels since August 31, reaching the level of 7.525 billion contract at the end of yesterday. The same applies to Ethereum, which has approximately 3.7 billion contracts," explained Samer Hasn, research analyst at XS.com.

However, other analysts such as those at Santiment believe that the latest Bitcoin data indicate a high probability of a price correction due to higher than usual profit-taking. Specifically, Santiment noted that profit-taking in the Bitcoin market has reached a two-month high in the last 24 hours, coinciding with the recent market rally. Interestingly, Santiment also highlights that Bitcoin continues to experience exponential growth in unique address activity despite the prevailing uncertainty in the market. The bitcoin blockchain has also maintained an average of 1.1 million addresses dedicated to sending and receiving Bitcoins daily over the past five months.

In other market news, most cryptos emulate the big two. XRP rises 3% in the last 24 hours, while Solana (SOL), Dogecoin (DOGE) or Cardano (ADA) follow in its wake, although the latest movements are downward.