Bitcoin Rebounds Above $27K as Investors Weigh Debt Ceiling Debate, Liquidity Concerns

Bitcoin (BTC) kicked off the U.S. trading week with gains, moving above $27,000 from as low as $25,800 late on Friday.

The largest cryptocurrency by market capitalization was recently trading at around $27,350, up roughly 1.6% in the past 24 hours, according to CoinDesk data. After dipping below $26,000 on Friday, bitcoin had hovered below the $27,000 mark until late Sunday.

Edward Moya, senior market analyst at foreign exchange market maker Oanda, suggested in a Monday note that upcoming debt ceiling talks will “tell us a lot if investors believe bitcoin can behave more of a safe-haven despite all the regulatory uncertainty."

“Bitcoin seems poised to stay in a range, but if risk aversion triggers a de-risking moment, we could see selling pressure extend below last week’s low,” Moya wrote.

Ether (ETH), the second-largest cryptocurrency by market capitalization, rose more than 1% to hover around $1,830 Monday afternoon. Among other digital assets, LDO, the governance token for the liquid staking platform Lido, surged 11% to trade at $2.15, while indexing protocol The Graph's GRT token jumped more than 12% to trade at $0.12.

The CoinDesk Market Index (CMI), which measures overall crypto market performance, was up roughly 1.8% for the day.

Investors have been weighing the low liquidity of late in crypto markets, with market makers Jane Street and Jump Crypto last week retreating from crypto trading in the U.S. due to regulatory uncertainty. Crypto data firm Kaiko’s report on Monday showed that BTC’s 1% market depth – a gauge that measures liquidity conditions – dropped 4% over the past month, while ETH’s slid 2%. Altcoin liquidity suffered even worse, down roughly 17% on a monthly basis.

“Due to the dire state of the stock market, institutional and professional investors no longer have access to the excess liquidity they would usually allocate to invest in the crypto market,” Sheraz Ahmed, managing partner at blockchain consultancy Storm Partners, told CoinDesk.

Equity markets turned green on Monday, with the S&P 500 closing higher by 0.3% and the tech-heavy Nasdaq up just shy of 0.7%. The Dow Jones Industrial Average (DJIA) edged ahead by 0.1%.

In bond markets, the note on the 2-year Treasury yield remained little changed at 4.00% Monday, while the 10-year Treasury yield rose 3 basis points to 3.50%. Greg Cipolaro, global head of research at bitcoin-focused investment firm NYDIG, pointed out in a Friday research note that yield curve inversions similar to the current one have more often than not indicated a recession in the next 12 months.

Investors this week across the board will be eyeing several economic readings for indications of a slowdown, including U.S. monthly retail sales and housing data.

“Recessions are inevitabilities of the economic cycle, and while predicting them is no easy feat, how markets and asset prices respond will likely be determined by the fiscal and monetary response to the slowdown,” Cipolaro wrote. “Risk assets are already well off their highs, so there is reason to believe that a recession might not be as deleterious to financial markets given that we have already come through a significant correction,” he added.