by S BIRRUNTHA / pic by TMR FILE

A STRONG recovery in the crypto market has been observed in the last seven days, leading bitcoin to gain 10% to currently trade above US$42,000 (RM177,000).

According to a weekly report by Luno Malaysia and Arcane Research, ethereum has outperformed bitcoin, pushing its price above US$3,000.

The report noted that last week’s US Federal Open Market Committee went according to expectations, as a hike in the policy rate of 25 basis points was confirmed with projections on seven more hikes this year.

It indicated that the FOMC meeting might have provided the market with more clarity. Commenting on the report, Luno Malaysia country manager Aaron Tang (picture) said bitcoin led the pack with a 10% gain to exceed the US$42,000 resistance, eyeing a fourth attempt at breaking the US$45,000 (RM190,000) resistance this year.

He said furthermore, bitcoin continued to see a strong trend of higher lows in the last few weeks, suggesting that the momentum is favouring the bulls.

“Nevertheless, bitcoin remains well within the US$33,000 to US$45,000 trading range seen throughout 2022.

“If bitcoin fails to break out towards the upside of the US$45,000 resistance, we expect a retest of the US$42,000 support and possibly a revisit to the higher end of US$30,000,” he added.

Tang said on another note, the US Federal Reserve has announced that it will increase interest rates for the first time in more than three years.

He noted that the announcement might have provided the broader financial markets with more clarity on what to expect in the short term.

However, Tang said even though bitcoin lately has shown strength relative to the broader markets in a period of escalating macroeconomic uncertainty, the crypto market continues to be wary of upcoming volatility.

“Additionally, the 90-day correlation between bitcoin and the S&P 500 reached a new 17-month high on Friday.

“This correlation with the wider equities market has only been higher for five days in bitcoin’s history, highlighting an unprecedented correlation regime,” he added.

Meanwhile, the report pointed out that although there is a strong recovery for bitcoin, market participants are still fearful and remaining cautious.

It noted that the long streak of fearful market sentiment continues as the Fear and Greed Index hovers between “Fear” and “Extreme Fear”.

“Even though bitcoin lately has shown strength relative to the broader financial markets in a period of escalating macro uncertainty, the crypto market continues staying fearful,” the report said.

Additionally, the report also revealed that the seven-day average real bitcoin trading volume continues declining and is currently US$4 billion.

“Over the past seven days, we only saw one day with more than a US$7 billion trading volume, while most days saw volumes in the US$2 billion to US$5 billion range.

“We continue seeing significant discrepancies between weekend and weekday trading volumes, indicating that weekend traders have left the market,” it said.