Bitcoin (BTC) traded higher on Wednesday as upbeat China manufacturing data alleviated global growth concerns and improved risk appetite in global financial markets.
China's official manufacturing purchasing managers' index rose to 52.6 in February, the highest in over a decade, following January's 50.1, according to data released on Wednesday. A reading above 50 indicates an expansion of activity. Non-manufacturing PMI rose to 56.3 from January's print of 54.4.
The positive news out of China, the world's factory and largest trading partner of the U.S. and Germany, pushed the U.S. dollar lower against major currencies, lifting risk assets like bitcoin and stocks higher.
The leading cryptocurrency by market value jumped 4% from $23,000 to nearly $24,000 before pulling back slightly to $23,700, according to CoinDesk data. The dollar index, which tracks the greenback's value against majors, fell 0.5% to 104.36.
Hong Kong's Hang Seng index rose 4.15%, leading the risk-on recovery in Asian equity indices. Major European indices and futures tied to Wall Street's tech-heavy index Nasdaq also posted modest gains. Bitcoin is positively correlated to Nasdaq and stock markets, in general.
The cryptocurrency's early Wednesday bounce is consistent with the recent trend of Asian flows leading the market strength.
"We note that ever since the November BTC bottom, BTC has seen a healthy and stable uptrend during Asian hours, with no notable downside days. Returns during the U.S. session have been more erratic, with the major rallies in January occurring during the U.S. trading session, whereas last week's rally occurred during European hours," Vetle Lunde, analyst at K33 Research said in a note published on Feb. 21.
"Liquidity continues to be a huge offset to the tightening in rates, predominantly coming from the East. China continues to pump cash to maintain adequate liquidity in the banking system and to spark economic growth post covid-zero," David Brickell, director of institutional sales at crypto liquidity network Paradigm, said in the Fed. 28 edition of Macro Pulse newsletter.
Hong Kong has recently warmed up to crypto, giving rise to speculation that, eventually, China would relax restrictions. The island nation's Securities and Futures Commission (SFC) released a statement last month, announcing a consultation on the proposed requirements for operators of virtual asset trading platforms.
"With Hong Kong viewed as a trial ground for the mainland, the possibility for the vast sums of retail wealth to flow into crypto will maintain a positive sentiment offset to U.S.-driven FUD," Brickell noted.
From a technical analysis standpoint, a convincing move above February highs of around $25,000 is needed to strengthen the immediate bullish bias. The area around the said level capped the August bounce.
"The technical picture on the weekly timeframe suggests that only a consolidation above $25,000 will strengthen the bullish view of the market," Alex Kuptsikevich, senior market analyst at FxPro, said.
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