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Crypto: Bitcoin aims for $40,000 after relief rally, but what’s next? Investors eye Ukraine conflict and Fed decisions

Bitcoin was trading above $39,000 on Friday, after rebounding from a Thursday low of $34,338.

The cryptocurrency
BTCUSD,
+0.51%

gained about 2.4% over the past 24 hours, trading last around $39,216, according to CoinDesk data. Most major cryptocurrencies were up on Friday, with Ether
ETHUSD,
+2.48%

posting a 6.9% gain over the 24-hour stretch to around $2,775.

Bitcoin’s rally “was a bit of a rebound from that knee-jerk reaction,” said Martha Reyes, head of research at crypto exchange Bequant, in an interview. “I think for events like this, their impact on the global markets is not going to be significant over time, unless we have escalation. If the West decides to retaliate in military action, then that’s something that the market has not priced in.”

According to Coinglass, short positions holding $122.6 million bitcoin options were forced to be closed on Thursday, while $54.8 million of long positions were liquidated. Some analysts said the session’s liquidations of short positions contributed to bitcoin’s subsequent price upswing.

“Even today, it had a hard time going past pushing past $40,000,” a key psychological level, Kevin Kang, founding partner of crypto hedge fund BKCoin Capital, told MarketWatch in an interview. “It got close, and then as soon as it was about to hit that level it fell back downwards,” Kang said. Trading likely would be range-bound until there were significant sifts in the Ukraine conflict, according to Kang.

Investors also are watching for any new signs of how aggressively the Federal Reserve might tighten its monetary policy this year, particularly if surging oil prices complicate efforts by the Fed to get upward price pressures under control.

The Ukraine conflict, on one hand, could curb global economic growth, and support a less aggressive Fed strategy. But on the other, it could send inflation higher and accelerate Fed plans to hike interest rates.

Bitcoin often has traded in tandem with U.S. stocks over the past few months. The Dow Jones Industrial Average
DJIA,
+2.51%

on Friday surged 2.5% to close at 34,058.75, notching its best daily gain since early November 2020. On Thursday, the Dow snapped a five-session losing streak, closing up 0.3%, at 33,223.83, after falling as far as 2.6% in morning trading. 

Aside from price actions, industry participants are watching crypto’s role in the Ukraine conflict. After Russia’s invasion, non-profit organizations and volunteer groups in Ukraine have raised more than $4 million in crypto donations, according to research firm Elliptic. More than $3 million was sent by a single donor, Elliptic noted.

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