Cryptocurrencies climbed Thursday as the market took a pause from its two-day sell-off while investors digested key inflation data and the ongoing FTX saga.
Cryptocurrencies jumped right around the time CPI data was released, showing a smaller-than-expected rise. That gave investors hope that price pressures may be cooling and optimism in a time of extreme fear.
"This started as a relief rally after the massive selloff yesterday but turned into speculation along with all other risk assets that the Fed might slow down rate hikes after a lower than expected CPI print," Steve McClurg, chief investment officer at Valkyrie, told CNBC.
Bitcoin's correlation with stocks hit an all-time high in late September but has been falling for about a month now, though it saw a small tick up on Wednesday, according to Coin Metrics. Stocks also rallied following the CPI data.
"The industry is changing before our eyes – high-rate environments can do that to a young market," said Callie Cox, U.S. investment analyst at eToro. "Right now, it's hard to digest from a price standpoint because crypto doesn't have a fundamental center of gravity. But we know that society is moving toward a decentralized future, and blockchain technology has already proven to be immensely useful."
The spike also comes as investors are still digesting the details of the ongoing crisis at FTX and the potential contagion its failure may spread across the market. On Wednesday bitcoin posted a two-day loss of about 24%, and later in the evening fell further to a new bear market low of $15,558.10. Ether lost about 32% over the two days.
Despite the current reversal, bitcoin remains more than 70% off its all-time high, hit exactly one year ago.
Bitcoin and ether, the largest two cryptocurrencies by market cap, led the rest of the market higher. Solana, which has been hit hard by the FTX scandal, climbed 30% after losing more than 70% this week. Even FTT, the FTX token at the center of the exchange's troubles, jumped 21%. It dropped about 140% earlier this week.
Investors are still monitoring the situation at FTX, still unclear on the extent of the damage that has hit or will hit the rest of the market.
On Thursday, Sam Bankman-Fried, CEO of the troubled exchange, broke his silence on the matter and offered an apology to investors and the crypto industry for his failures in the liquidity crisis.
As the events unraveled this week investors hoped to see Binance save the day through a potential bailout, but its CEO announced late Wednesday that it had abandoned the idea.
Bankman-Fried is now in talks to raise capital to "be first used to do right by the customers," he said in his apology tweets.
"We still think there is some leverage to be unwound... so not short term bullish. Many asset managers have funds stuck at FTX," McClurg said. "There will likely be a wave of redemptions on this news, causing a third wave of selling pressure. Long term, we are bullish and believe we are close to the bottom."