Bitcoin mimics stock rally and hits 2-week high

A representation of the virtual cryptocurrency Bitcoin is seen in this illustration taken October 19, 2021. REUTERS/Edgar Su

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Feb 5 (Reuters) – Bitcoin hit a two-week high on Saturday, extending strong gains from the previous session as cryptocurrencies benefited from a pick-up in risk appetite and a rally stock markets.

The world’s largest cryptocurrency hit $41,983, taking gains from Thursday’s lows to almost 16% and marking a 27% rise from the year’s low of $32,950.72 on January 24.

Ether, the coin linked to the Ethereum blockchain network, hit the $3,000 level for the first time since January 21.

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Friday’s 11% plus was the biggest single-day gain for bitcoin since mid-June, and the first major rebound after weeks of turbulence, along with tech and growth stocks, on fears of faster-than-expected Fed rate hikes to curb a surge in inflation.

It was accompanied by a rally in U.S. stocks, the tech-heavy Nasdaq (.IXIC), ending the week with gains despite high earnings volatility, including robust growth at Amazon and disappointing results from Meta Platforms Inc (FB.O), owner of Facebook.

These synchronized moves showed how bitcoin has become a much more mainstream asset, rocked by swings in risk appetite.

“The current panic and volatility surrounding bitcoin is based on a fundamental misunderstanding of it as an asset class,” said Ed Hindi, chief investment officer of Swiss-based cryptocurrency hedgefund Tyr Capital.

“When Nasdaq valuations fall, ill-advised institutional investors begin mass liquidating bitcoin positions as if it were a tech stock.”

Bitcoin Correlations

The rally in stocks boosted other listed crypto assets on Friday, with miner Riot Blockchain (RIOT.O) taking a hit after reporting bitcoin production more than doubled in January from a year earlier.

Marathon Digital Holdings (MARA.O) rallied after reporting an increase in bitcoin production, as did crypto exchange Coinbase Global (COIN.O), which rose more than 7%.

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Reporting by Rachna Dhanrajani in Bengaluru and Vidya Ranganathan in Singapore; Additional reporting by Lisa Mattackal in Bengaluru; Editing by William Mallard

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