Bitcoin prices have been under pressure in 2022 after the collapse of algorithmic stablecoin terraUSD and subsequent bankruptcy filings from lender Celsius and hedge fund Three Arrows Capital.
Bitcoin topped $24,000 briefly on Friday, posting its best monthly performance in nine months as it continued to follow risk assets higher.
The world's largest digital currency reached $24,412 earlier Friday, hitting a six-week high, according to CoinDesk data, its highest level in more than six weeks. Bitcoin has since pared some of those gains and sat just below $24,000 by the end of the session.
The cryptocurrency rallied 4.8% this week, and it ended July up 26.8% for its best month since October and the first positive month in four.
Bitcoin's rally began after the Federal Reserve hiked interest rates on Wednesday, but signaled that the pace of such rises could slow. This sparked a rally in U.S. equities.
Moves in cryptocurrencies have traded broadly in line with U.S. stocks of late, in particular tracking the tech-heavy Nasdaq, which has jumped sharply in the last two days.
Other cryptocurrencies including ether were sharply higher on Friday.
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"Overall, I think markets have reacted positively to the Fed's comments and arguably have priced in most of the rate hikes," Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, told CNBC via text message.
"There seems to be a lot of liquidity sitting on the sidelines, which is now coming in based on the last few months of consolidation/downward pressure, that is now easing up," he added.
Still, bitcoin is down about 48% this year and remains more than 60% off of its all-time high price of $68,990.90 that was hit in November.
The crypto market has been plagued by a number of issues including the collapse of algorithmic stablecoin terraUSD, which sparked a chain of events that led to the bankruptcy of lending platform Celsius and hedge fund Three Arrows Capital.
Market participants are trying to figure out where the bottom is for bitcoin and whether the deleveraging and shakeout in the industry is over. Market players told CNBC that they want to see an improving macroeconomic picture and the completion of deleveraging before the bottom for bitcoin is found.
Bitcoin has been trading within a range of around $18,000 to just over $24,000 since mid-June, and Luno's Ayyar said that investors had been accumulating bitcoin at those prices.
