Crypto-linked equities rallied Monday as bitcoin broke above $86,000 for the first time in eight months.
MicroStrategy Incorporated (NASDAQ:MSTR) led gainers, rising as much as 8% after bitcoin’s first weekly close above its 50-week moving average in 45 weeks triggered a $300 million short squeeze. Coinbase Global Inc (NASDAQ:COIN) climbed around 5%, while bitcoin miner Marathon Digital (NASDAQ:MARA) advanced roughly 6%. Bit Digital Inc (NASDAQ:BTBT) was also up around 8%.
Falling oil prices, down for a fourth straight session, eased inflation concerns and pulled Treasury yields lower, adding further support to the rally.
Chris Beauchamp, chief market analyst at IG, said financial markets had shifted back into a risk-on mode after weeks dominated by worries over government bond yields, debt levels and the possibility of tighter central bank policy.
“It has been months since bitcoin has seen the world above $80,000, but it has finally managed to breach the May highs in early trading today,” Beauchamp said. “Cryptocurrencies are advancing in a group this morning, a move given strength by recent inflows and one likely to attract even more of those vital funds.”
Beauchamp added that falling oil prices were also helping the rally, alongside signs that investors are adjusting to a higher US rate environment.
The move comes as the regulatory outlook for the sector remains unsettled following the collapse of the Clarity Act in Congress. Beauchamp said the bill’s failure leaves the industry facing a turf war between the SEC and the CFTC, with little prospect of resolution before the midterms.
“Having pushed hard to get a clear set of legislative rules in place, the cryptocurrency industry now faces a much more uncertain future, hoping that lawmakers can find a way forward after the mid-terms,” he said. “This seems unlikely, given how we can expect the next two years to be a bitter partisan fight.”
Beauchamp said the breakout above May’s highs is likely to reignite investor interest in the sector after enthusiasm from August’s rally had begun to fade. He noted bitcoin has historically posted negative average returns in August and September, and Monday’s move puts it back into what has traditionally been a ten-month positive stretch for the asset.