Bitcoin is adding to last night’s gains in early US trading on Friday, continuing strong relative price action after many months of underperformance compared to assets such as stocks and precious metals.
Trading at $73,500, bitcoin is up nearly 5% in the past 24 hours, with most of these gains coming after U.S. Treasury Secretary Scott Bessent declared on Thursday afternoon that the Trump administration is taking concrete steps to try to limit the rise in oil prices.
Bitcoin is up about 11% since war broke out in Iran, outperforming major US stock indexes and gold, both of which have lost ground since the bombs started dropping about two weeks ago.
WTI oil on Friday is trading at $94.50 per barrel, down from a high of nearly $98 on Thursday. US stocks post gains of approximately 0.5%.
Oil increases the risk of stagflation
The recent rise in oil prices is putting direct pressure on household budgets and, if sustained, could weaken consumer spending and slow economic growth, according to Olu Sonola, head of US economics at Fitch Ratings.
“Yes, the broader economy is expected to continue growing at its usual pace, but that forecast looks increasingly fragile as downside risks accumulate. … The Federal Reserve can ignore areas of slowing growth, but resurgent inflation severely limits its room for maneuver, leaving policy potentially deadlocked for months,” he wrote in a note.
Relief bounce
After a period of some of the worst sentiment in bitcoin history, it is perhaps not surprising that there have been some modest gains of late.
The funding position of perpetual futures traders has been negative for the longest period since late 2022, K33 Research analyst Vetle Lunde noted. This means that traders who are short bitcoin positions are paying longs to keep their trades open, resulting in a negative funding rate. Late 2022, of course, coincided with the aftermath of the FTX crash, when BTC was trading around $16,000 versus $69,000 a year earlier.
The 30-day average funding rate has been negative for 14 consecutive days, the longest streak since December 2022, Lunde noted. These negative streaks coincided with local price lows in the last seven years, he added.
Meanwhile, bitcoin open interest in perpetual and dated futures has increased by 9% in the last 24 hours, reaching around 700,000 BTC, the highest level since February 6. Adding it all up, that creates the conditions for a short squeeze.
Friday’s profit
The day is not over yet, but this would be the first Friday of gains since the conflict in the Middle East began on February 27. This could suggest a less volatile weekend for cryptocurrencies, which have tended to decline on Saturdays and Sundays in recent weeks.
March is also shaping up to be a turning point for bitcoin. The asset is up around 8% so far this month. Again, it’s early, but a breakout in March would break BTC’s five-month bearish streak.