Key learning points
- Bitcoin has broken $21,000 after falling below $20,000 earlier this week.
- The wave has helped the crypto market come back to life.
- The recent decline in the dollar may explain the rally.
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The latest Bitcoin rally has resulted in several other tokens making double-digit gains in the past 24 hours.
Bitcoin bounces back
Bitcoin shows strength for the first time in weeks.
According to CoinGecko data, the major cryptocurrency is up 10.1% on the day. It’s trading at around $21,030 at the time of writing, breaching the crucial $20,000 psychological level it has been stalled below since the beginning of the week. While there is no apparent catalyst behind Bitcoin’s bullish movement, a declining dollar and rising stocks could be responsible.
Notably, Bitcoin has been surging Ethereum despite losing ground to the second-ranked crypto asset since mid-July. After the Ethereum to Bitcoin ratio hit a 2022 high of 0.085 earlier this week, ETH has lagged behind BTC in the recent surge. ETH is currently trading at $1,723, up 6.5% today.
The top crypto is leading the way despite expectations that Ethereum’s long-awaited “Merge” to Proof-of-Stake is getting feverish. Bitcoin’s dominance over the global cryptocurrency market cap has recovered from historic support at around 39%, suggesting further gains against Ethereum are in the cards. According to TradingView data, BTC.D is currently sitting at just over 40%.
Bitcoin’s show of strength appears to have inspired a rally across the broader market. Cosmos’ ATOM token is one of the biggest gainers in the last 24 hours, rising more than 22%. While Bitcoin’s surge may have sparked interest in ATOM, the upcoming ATOM 2.0 announcement is slated for the Cosmoverse conference later this month, enthusiasm for the project could also be fueled. Among other improvements, ATOM 2.0 will also include adjustments to the project’s tokenomics, such as a reduction in inflation.
Other Cosmos ecosystem projects also appear to be benefiting from the market impulse. Osmosis, a decentralized exchange built using the Cosmos software developer kit, gained 17.3%. Evmos, a blockchain connecting the Cosmos ecosystem with other Ethereum-compatible chains, is up 9.6%.
In addition to Bitcoin and the Cosmos ecosystem, Layer 1 blockchains Solana and Cardano posted 6.5% and 5% gains, respectively. Even older crypto projects that have struggled under the weight of recent bearish macroeconomic conditions have managed to make bids. For example, Filecoin and Zcash have both posted double-digit gains.
The Dollar Currency Index reached a local high of 110.7 on Wednesday, although the dollar has weakened during the second half of the week. Demand for the greenback fell on Thursday after the European Central Bank’s decision to raise interest rates by 75 basis points, strengthening the euro. The dollar’s decline has brought relief to risky assets such as cryptocurrencies and US stocks, which could explain Bitcoin’s rapid rise.
Disclosure: At the time of writing this piece, the author owned ETH, BTC, and several other cryptocurrencies.