Bitcoin price makes a comeback, hitting a six-month high

Wall Street finally seems to get the Federal Reserve’s message: more interest rate hikes will be needed to keep inflation from rising. This reality check has added volatility to the stock market over the past week.

Cryptocurrency investors appear to be operating in a different reality, reports the DealBook newsletter. Bitcoin, which traded above $24,000 on Thursday, hit a six-month high as investors eagerly drift back into risky digital assets, despite a series of headlines that appear to test supporters’ optimism of cryptography.

There is the shadow of the spectacular collapse of cryptocurrency exchange FTX, which has left investigators on a global hunt to recover billions in missing assets. Amid attempts to recover funds to reimburse FTX customers, attention has turned to $400 million that sits in an interest-bearing bank account.

And the Securities and Exchange Commission on Wednesday proposed a new “custody” rule that would, among other things, limit the ability of asset managers to place client money in crypto assets.

So what’s behind the rally? Some say this is a so-called short squeeze, in which those who bet against Bitcoin have to cover their positions by buying more. Another explanation is tax loss harvesting, in which investors sell at a loss at the end of the year to reduce their tax impact, then add back to their holdings when the calendar changes.

Either way, market watchers are already wondering how long the rally can last.