Bitcoin (BTC) price rebounds above $27,000 as investors weigh in on debt ceiling debate and liquidity concerns

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Bitcoin (BTC) kicked off the US trading week with gains, rising above $27,000 from $25,800 on Friday night.

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

Edward Moya, senior market analyst at forex market maker Oanda, suggested in a Monday note that upcoming debt ceiling talks will tell us a lot about whether investors think bitcoin can behave more like a safe haven despite all the regulatory uncertainty.”

Bitcoin looks set to stay in a range, but if risk aversion triggers a moment of risk reduction, 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 on Monday afternoon. Among other digital assets, LDO, the governance token of liquid staking platform Lido, jumped 11% to trade at $2.15, while peg protocol The Graph’s GRT token jumped 11% to trade at $2.15. jumped over 12% to trade at $0.12.

The CoinDesk Market Index (CMI), which measures the overall performance of the crypto market, rose around 1.8% for the day.

Investors have been weighing the low liquidity in crypto markets lately, with market makers Jane Street and Jump Crypto pulling out of U.S. crypto trading last week due to regulatory uncertainty. Crypto data firm Kaikos’ report on Monday showed that BTC’s 1% market depth, a gauge that measures liquidity conditions, fell 4% over the past month, while ETH slid 2%. Altcoin’s liquidity suffered even more, down around 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 cash they would usually allocate to invest in the crypto market, said Sheraz Ahmed, managing partner at the consultancy Blockchain Storm Partners, at CoinDesk.

Stock markets turned green on Monday, with the S&P 500 closing up 0.3% and the tech-heavy Nasdaq up just under 0.7%. The Dow Jones Industrial Average (DJIA) rose 0.1%.

In bond markets, the rating on the 2-year Treasury yield remained little changed at 4.00% on 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 research note on Friday that yield curve inversions similar to the current one most often indicated a recession in the over the next 12 months.

This week, investors across the board will be watching several economic readings for signs of a slowdown, including monthly U.S. retail sales and housing data.

Recessions are inevitable in the business cycle, and while predicting them is not an easy task, the reaction of markets and asset prices will likely be determined by the fiscal and monetary response to the downturn, Cipolaro wrote. Risky assets are already far from their highs, so there is reason to believe that a recession might not be so bad for financial markets given that we have already been through a significant correction, he added. .

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