Bitcoin jumps to $41,000 while breaking out of trading range

Bitcoin briefly spiked above $41,000 for the first time in a week, bringing the cryptocurrency out of its recent narrow trading range, as risk assets rebounded worldwide.

The largest digital asset by market value jumped as much as 5.7% to $41,691 before paring its gains in early New York trading. It is down about 12% this year. Other tokens such as Ether and Solana also got a lift. Stocks rose, with Chinese equities rallying on a pledge by Beijing for policies to boost financial markets.

“Whenever we see stock market relief, crypto tends to do well, especially lately,” said Marcus Sotiriou, an analyst at London-based digital asset broker GlobalBlock. “At the end of the day, the key driving force behind prices is macro, so I expect a struggle for a sustainable uptick.”

A sustained rally is unlikely while the Federal Reserve tightens through the year, billionaire cryptocurrency investor Michael Novogratz who heads Galaxy Digital Holdings Ltd. said Tuesday during a TV interview on Bloomberg Crypto. Bitcoin is likely to stay in a range of $30,000 to $50,000 in an environment of rising interest rates, he said.

Bitcoin had spent the past few days mired in the tightest trading range since October 2020, a phenomenon some market watchers ascribed to long-term holders stepping in to buy whenever the token dips. Meanwhile, selling by short-term investors has kept Bitcoin and other digital assets from mounting sustainable gains.

The Fed is poised to raise interest rates Wednesday for the first time since 2018, with investors focused on how aggressive central bankers plan to be in tackling the hottest inflation in four decades. The Federal Open Market Committee is all but certain to raise rates by a quarter percentage point at the conclusion of its two-day policy meeting.

The FOMC’s fresh forecasts are likely to project four interest-rate hikes in 2022 and three in 2023, according to economists surveyed by Bloomberg.