Why is the Bitcoin price bouncing back this week?

Crypto markets look to be playing catch up with the risk asset rally they missed out on last week.

| More on:
Two investors look at a graphic showing a bitcoin in the centre

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Key points

  • The Bitcoin price is up 8% since Monday
  • Cryptos are playing catchup with last week’s strong Nasdaq performance
  • Bitcoin has lost ground for the last eight weeks running

The Bitcoin (CRYPTO: BTC) price has been marching higher this week.

When most Aussies were greeting the day on Monday morning, the world’s top token by market cap was trading for US$29,100.

At the time of writing, the Bitcoin price stands at US$31,591, up 8.5% so far this week.

What’s going on?

Cryptos catching up from last week’s decoupling

2022 has seen cryptos move in almost lockstep to risk assets.

When the tech-heavy Nasdaq has posted losses, so too have most cryptos. And when risk assets have rebounded, the Bitcoin price has followed suit.

But last week that relationship broke down, with cryptos decoupling from share markets for the first time this year.

In last week’s trading, the Nasdaq gained 6.7% as investors took heart that interest rates might not rise as quickly or far as the US Fed had earlier indicated. The Bitcoin price, on the other hand, fell 5.5% last week, its eighth consecutive week of losses.

Commenting on this week’s broader crypto rally, chief investment officer at LedgerPrime Shiliang Tang said (as quoted by Bloomberg), “I expect this gap to close a bit in the short term with crypto catching up.”

Meantime, the CEO of social media trading platform Alpha Impact, Hayden Hughes, added:

Markets are long overdue for a relief rally. Bitcoin just went through eight consecutive weeks in red territory and got technically oversold to levels we traditionally only see at the bottom of bear markets.

On Alpha Impact, we’re seeing heavy buying of Ether and several altcoins, and these patterns mirror what we saw in the July 2021 bear market bottom and the January 2022 local bottom.

Bitcoin price to the moon? Not so fast!

Don’t bet the farm on the Bitcoin price continuing to charge higher just yet, though. In fact, don’t invest any more than you can comfortably afford to lose.

A strategist at crypto exchange LMAX Digital, Joel Kruger, sounded a note of caution.

Noting that markets were closed in the United States on Monday for the Memorial Day holiday, he said the Bitcoin price gains were “happening in very thin trading conditions over a weekend and into a US holiday…  So price action needs to be taken with a grain of salt.”

The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin. The Motley Fool Australia has positions in and has recommended Bitcoin. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Cryptocurrencies

A man holds his hand under his chin as he concentrates on his laptop screen and reads about the ANZ share price

Why this Bitcoin maximalist says all other ‘crypto is a scam’

Initially introduced in a 2008 whitepaper by one or more people going by the pseudonym of Satoshi Nakamoto, Bitcoin launched…

Read more »

A hand reaching into a computer to grab digital money, indicating a rise in the use of cryptocurrency

Why an RBA-issued crypto-like currency could soon be a reality

The RBA is piloting a central bank-baked digital currency.

Read more »

A male investor wearing a white shirt and blue suit jacket sits at his desk looking at his laptop with his hands to his chin.

Can the Bitcoin price reach US$30,000 again in 2022?

Rising interest rates have resulted in significantly less institutional investor interest in cryptos.

Read more »

A man sits in despair at his computer with his hands either side of his head, staring into the screen with a pained and anguished look on his face, in a home office setting.

Could this key metric signal more bad news for the Bitcoin price?

Crypto investors are keeping a close eye on the signals that could see the US Federal Reserve begin to ease…

Read more »

Man sitting at a desk facing his computer screen and holding a coin representing discussion by the RBA Governor about cryptocurrency and digital tokens

Is it smart to use dollar cost averaging to buy Bitcoin?

Should investors consider a DCA strategy for cryptocurrencies like Bitcoin?

Read more »

A hip young guy works at his home workstation with two screens and a gamers chair, keeping an eye on his crypto investments.
Share Market News

Bitcoin price dips in August after soaring 22% in July. What’s going on?

The greater presence of institutional investors in crypto markets looks to be adding to the correlation between cryptos and other…

Read more »

A very sad beagle cross dog lays dejectedly on a sofa with his short legs stretched out in front of him in a pose of flat defeat as he stares sadly at the camera.

Expert panel slashes 2022 outlook for Dogecoin price. Here’s why

Originally created as a joke, Dogecoin still has a market value of nearly US$9 billion despite crashing 91% from last…

Read more »

an image of a gold bitcoin and a gold ethereum coin side by side against a backdrop of a graph with reda and green bars representing rising and falling prices.

Bitcoin price dips. Is Ethereum on track to dethrone the top crypto?

Bitcoin is up 22% since 1 July while Ethereum has leapt 56% higher.

Read more »