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Bitcoin jumps back above $37,000 as cryptocurrencies rally

A physical representation of Bitcoin
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After climbing to over $38,000 in the wee hours of Friday, the price of Bitcoin settled back to $37,537 on late Friday morning. Bitcoin gained 2.5 percent over the prior 24 hours, according to CoinMarketCap. The bellwether digital currency has fought for direction over the last week or more, trading in a range between about $36,500 and $39,000.

The price of Ethereum rose more strongly overnight and traded at $2,780 on Friday morning. It jumped about 6.5 percent over the last 24 hours, but still trades well below its all-time high of nearly $4,900 in November, down about 43 percent.

It was a similar picture for many other major cryptocurrencies, with strong gains over the last 24 hours for many, after the market shrugged off news on Thursday of hackers stealing about $325 million in cryptocurrency.

The broad-based gains come following a surprisingly strong jobs report that saw U.S. employers hire 467,000 people, compared to an expectation of 125,000. The move gives the Federal Reserve, which has already telegraphed a rate hike in the near future, even more reason to proceed with raising interest rates. Cryptocurrency has spent much of the last three months grappling with the prospect of higher interest rates, with prices plummeting.

Here’s how other top altcoins fared as of Friday morning:

  • Solana – up 6.2 percent
  • Avalanche – up 5.7 percent
  • Polkadot – up 3.3 percent
  • Polygon – up 3.1 percent
  • Binance Coin – up 2.4 percent
  • Cardano – up 1.7 percent
  • XRP – up 1.6 percent
  • Dogecoin – up 1.3 percent
  • Shiba Inu – up 1.1 percent

The cryptocurrency market is also awaiting further clarity from the Biden administration, after reports that it will soon file an executive order that directs the federal government to set policies and regulate digital assets such as cryptocurrency.

Bitcoin stuck below $40,000

Bitcoin’s price has been under serious pressure since the Fed’s early November meeting. The cryptocurrency topped out at nearly $69,000 in November.

From there, it’s been mostly downhill. The downtrend continued through much of December and into January. After peeking above $51,000 in late December, the digital currency fell to nearly $33,000 in late January. Bitcoin bounced off six-month lows set earlier in the week but remains down nearly 20 percent since the start of the year.

Nevertheless, Bitcoin remains atop the list of most valuable cryptocurrencies by total market capitalization.

Inflation surges as the Fed prepares to hike rates

At its January meeting, the Fed announced that it was continuing to taper its purchases of bonds and expects to stop buying bonds by early March. The central bank also indicated that it was poised to increase rates soon, signaling what many experts expect will be a rate hike as early as March.

“With inflation well above 2 percent and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate,” said the Federal Open Market Committee in a prepared statement.

Now market analysts are expecting the Fed to increase interest rates at its upcoming March meeting. According to CME’s FedWatch Tool, the market is now pricing in a 100 percent probability that rates will rise in March. The only outstanding question is by how much. The market is expecting a 73 percent probability of a boost of 25 basis points, with the remainder projecting a larger 50-point hike.

“While we’re on the cusp of the Fed beginning to raise interest rates, the more significant step of starting to run off the balance sheet is still to come and the Fed provided no additional details in their post-meeting statement,” says Greg McBride, Bankrate’s chief financial analyst. “The combination of rate hikes and eventually shrinking their asset portfolio will complete the transition from going full throttle to putting the brakes on the economy.”

With inflation rising last year at the highest pace in 40 years, the Fed is looking to dampen price increases but not hit the brakes too hard. The resulting decline in stimulus has roiled financial markets in 2022.

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Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.

Written by
James Royal
Senior investing and wealth management reporter
Bankrate senior reporter James F. Royal, Ph.D., covers investing and wealth management. His work has been cited by CNBC, the Washington Post, The New York Times and more.
Edited by
Senior wealth editor