Bitcoin Retakes $20K, Crypto Recovers as Dollar Eases

© Reuters.

By Ambar Warrick

Investing.com-- Bitcoin prices rose back above $20,000 on Friday, with the crypto market tracking a broader recovery in risk-driven assets as the dollar retreated from 20-year highs.

The world’s largest cryptocurrency jumped nearly 6% to $20,455.4 by 01:23 ET (05:23 GMT), also recovering from levels close to its 2022 lows. The token was set to add over 6% this week.

This saw total crypto market capitalization rise back above the $1 trillion mark, albeit slightly.

Bitcoin’s recovery was spurred largely by weakness in the dollar, which eased further from a 20-year peak hit earlier in the week. Easing Treasury yields, coupled with a bigger-than-expected rate hike by the European Central Bank, helped take the wind out of the dollar’s sails.

Other cryptocurrencies also recovered. No.2 crypto Ethereum rose 4.4% to an over three-week high of $1,704, while a slew of other smaller altcoins also rose.

Ethereum has largely outperformed its crypto peers over the past month ahead of its upcoming shift to a proof-of-stake model. The shift, dubbed “the merge,” will see the token abandon mining in favor of staking, greatly reducing its power consumption and potentially making it more accessible.

But while crypto markets appeared to be recovering, investors feared a swift reversal of fortune in the near term.

Federal Reserve Chair Jerome Powell said on Thursday that the bank will continue to tighten monetary policy sharply to combat inflation. His comments saw traders increase their expectations for a 75 basis point hike by the Fed later this month.

Rising interest rates are largely behind crypto’s sharp losses this year, as the Fed unwound two years of ultra-loose monetary policy.

With most other major central banks also raising interest rates, the scope for a major crypto recovery is limited in the short term.