Bitcoins early-week rally began to fade after US markets opened Thursday, sending the cryptocurrency up nearly 2% over the past 24 hours to $71,400.
The move comes alongside declines in broad equity markets as the Iran war shows no signs of moving to a quick end, sending oil up 5.3% to $78.70 a barrel. barrel. The Dow Jones Industrial Average is down 1.4% and the S&P 500 is down 0.7%.
However, the Nasdaq is only down 0.4% as the previously battered software sector captures a big bid. The iShares Expanded Tech-Software Sector ETF ( IGV ) is ahead 2% and is now up about 9% over the past five sessions.
This divergence is notable as bitcoin has been closely tied to the software sector, both of which have tumbled since October amid investor concerns over AI disruption, and each has bounced off their lows in tandem in recent days.
New bull or bear market?
Bitcoin “hasn’t settled yet,” said Arthur Hayes, CIO of Maelstrom, noting that despite the rise to $74,000, the correlation with the IGV ETF remained. Whether Thursday’s decoupling will last remains to be seen, but software names pushing higher while bitcoin pulls back is not what crypto bulls wanted to see. “It could be a dead cat jumping,” Hayes continued.
Traders today may also take some chips off the table ahead of Friday’s key US jobs report for February. The latest economic data has mostly surprised on the upside, pushing down the odds for a resumption of interest rate cuts by the Federal Reserve.
Interest rate traders on the Chicago Mercantile Exchange now see an 88% chance that the Fed will keep rates steady not only at this month’s meeting, but also in April. A month ago, these odds were 59%.
“We are cautiously constructive, but the geopolitical tail risk calls for humility,” said Bryan Tan, trader at Wintermute. He said improved flows to spot bitcoin exchange-traded funds (ETFs), which have recorded nearly $2 billion in inflows in the past week alone, alongside stabilizing trading volume, are supporting the market, while muted reaction to disruptions around the Strait of Hormuz could leave room for bitcoin to climb toward the $74,000-$75,000 range.
Bitfinex analysts said there has been a “noticeable increase in spot market strength”, indicating that the recent rise was driven by market buyers rather than speculative leverage.
“We believe there is scope for relief over the coming weeks and months should this trend continue,” they added.
