Bitcoin Surpasses $57K but Gains Remain Limited Amid Macro Risks

Bitcoin’s price experienced an uptick on Wednesday, continuing its recovery from five-month lows as investors took advantage of lower prices, leading to a slight improvement in market sentiment.

This positive trend was mirrored across the broader cryptocurrency market, which also saw gains following the previous day’s recovery. Factors contributing to Monday’s price declines, including fears of a U.S. recession, Japanese interest rate hikes, and escalating tensions in the Middle East, continued to impact investor sentiment.

Bitcoin rose by 4.3% to $57,190.90 as of 09:13 ET. The cryptocurrency had dropped to around $49,000 earlier in the week before bouncing back. Despite this rebound, Bitcoin remained below levels seen prior to Monday’s declines, as cryptocurrency markets faced added pressure from potential mass sales by the U.S. government and decreasing interest in crypto derivatives.

The risk-averse climate resulted in substantial outflows from crypto derivatives, particularly exchange-traded funds, over the past week. Additionally, optimism regarding regulatory changes in the U.S. has diminished amid the intensifying 2024 presidential race, with Democratic nominee Kamala Harris gaining traction alongside Republican pro-crypto candidate Donald Trump, according to a recent poll.

In a separate development, the International Monetary Fund (IMF) announced progress in its discussions with El Salvador regarding a funding program. However, the country’s adoption of Bitcoin remains a contentious issue. Preliminary understandings have been reached to enhance El Salvador’s economy, though the IMF expressed concerns about potential risks stemming from Bitcoin’s legal tender status. Since adopting Bitcoin in 2021, El Salvador’s ambitious cryptocurrency infrastructure plans have faltered, with limited fiscal improvement and little interest in its proposed “Bitcoin bonds.”

In the broader cryptocurrency market on Wednesday, altcoins exhibited mixed performance. The second-largest cryptocurrency, Ethereum, rose by 0.5% to $2,457.49, while other altcoins like Cardano and Solana increased by 3.8% and 10.5%, respectively. Among meme tokens, Dogecoin and Shiba Inu saw gains of 5.4% and 3.4%.

In corporate news, Ark Invest, led by Cathie Wood, made headlines by purchasing an additional 19,892 shares of Coinbase, valued at approximately $3.9 million, across three of its exchange-traded funds. This acquisition was part of the firm’s portfolio rebalancing after Monday’s downturn. Ark Invest’s purchases included significant amounts allocated to its Innovation ETF, Next Generation Internet ETF, and Fintech Innovation ETF. Following a notable $17.8 million investment in Coinbase earlier in the week, the stock has become a key holding within Ark’s funds.

Coinbase shares rose by 2.48% on Tuesday, recovering from a sharp 15% drop earlier in the week driven by concerns over market volatility and geopolitical issues, and continued to rise by an additional 1.3% in Wednesday’s premarket trading.