Bitcoin has extended gains over the weekend ahead of celebrations for the Lunar New Year holiday and the Spring Festival throughout Southeast Asia, rallying to its highest level since August.
The flagship cryptocurrency surged to over $23,000 on Saturday, gaining as much as 10% at one point compared to the earlier day, data by CoinMarketCap shows. The coin has reached a local high of around $23,282, a level not seen in more than five months. As of now, Bitcoin is trading around $22,900, almost flat over the past day.
Ethereum, the second-largest cryptocurrency, also registered significant gains, reaching a local high of around $1,674, a level not seen since September last year when its much-anticipated Merge upgrade went through. The total market cap has passed the $1 trillion mark.
The rally comes as Bitcoin has historically performed well at the start of the Lunar New Year holiday celebrated across much of Asia, often referred to as Chinese New Year. According to Markus Thielen, head of research at Matrixport, the Lunar New Year holiday is considered a good entry time for investors. He said:
“Buying Bitcoin at the end of the first day of Chinese New Year and selling it 10 trading days later would have returned +9%, on average, with all of the last eight years (2015-2022) showing positive returns. The beginning of the Chinese New Year has been an attractive entry timing for long positions.”
Bitcoin and Ethereum are up around 38% and 35% year-to-date. While a mix of factors might have impacted crypto’s impressive start this year, the market managed to gather momentum after new data released by the U.S. Department of Labor last week indicated a cooldown in inflation.
The annual inflation rate fell to 6.5% in December, compared to 7.1% in November. Lower inflation is usually viewed as bullish for risk assets like crypto as it puts pressure on the US Federal Reserve to slow down interest rate increases.
Meanwhile, crypto bulls expect the crypto market to continue its upward movement, Sean Farrell, head of digital asset strategy at Fundstrat, anticipates Bitcoin to reach between $35,000 to $44,000 this year, and Ethereum between $2,400 to $3,200. However, he has still warned investors to be wary of near-term risks. He said:
“Despite our view that the absolute lows for the majors are in, we still believe there are some near-term risks to remain cognizant of. These include additional fallout from DCG, one more swipe at risk assets at the next FOMC meeting, and the fact that despite the recent rally, we are still amidst what we would consider an on-chain bear market.”