Here’s what analysts predict

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The price of Bitcoin is up 28% so far this year, driven in part by investor optimism about signs of a slowing rate of inflation and hope that the US Federal Reserve will dampen increases interest rate.

Bitcoin surpassed $21,000 on Saturday for the first time in two months, up 28% since the start of the month, and was trading at $21,261.39 at the time of writing.

This gives crypto fans a reason to rejoice.

The Fed raised borrowing rates seven times in 2022 in an attempt to combat high inflation, sending risky assets such as stocks — especially tech stocks — into a downward spiral. The central bank’s benchmark funds rate rose to 4.25-4.5% in December, hitting its highest level since 2007.

Bitcoin has been caught up in the market drama around lending rates as it is increasingly viewed by investors as a risky asset. Risky assets are generally very volatile. Stocks, real estate and currencies also fall into this category.

When Bitcoin prices rise, fans often characterize the crypto as anti-inflationary and “digital gold.” Instead, the crypto asset moves more like risky assets such as stocks, reaching high correlations with the S&P 500, Decrypt reported in February 2022.

A dark year in 2022 saw scandals, failures, bankruptcies and fraud in the crypto industry, including the collapse of FTX, a massive failure of terraUSD and associated Luna. The contagion has impacted BlockFi, Celsius Network and Voyager Digital exchange. Irresponsible lending and leveraged trading has also plagued the industry, raising questions and doubts about the ability of crypto exchanges to protect investors’ assets. Calls have been made for more regulation.

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Quantitative analyst PlanB tweeted to its 1.8 million followers that Bitcoin bottomed in November 2022 at $15,500 and short-term holders were now in profit territory, a traditionally bullish signal, reported. Daily Hodl.

Plan B predicts that the price of Bitcoin could hit $1 million in the next bull market. “Actually, I think the bull market range will be $100,000 to $1 million, but a lot of people don’t understand wide margins (or the volatility that creates them), so I’ve pinned it to comfortable. $100,000.”

In contrast, popular trader Capo, known for his 2022 bearish trend, played down the latest crypto price rally that saw many altcoin prices explode by 30% or more in the past week. Capo predicted a further drop in prices.

“The market is bouncing back more than expected. It’s a certainty. Now… is the bearish scenario invalidated? I will explain why I think new lows are still likely… BTC is still testing major resistance. The weekly close will be key, but there is no bullish confirmation yet,” Capo tweeted.

Capo also said he sees weakness in the stock market, which has been largely correlated with crypto over the past few years.

The S&P 500 is forming repeating lower highs, Capo said, and he predicted that first-quarter earnings won’t be good for most of the big companies listed in the index: “The downtrend in traditional markets is also intact. SPX continues to form lower highs all the time and the gain session should be bad.

Analysts say Bitcoin’s New Year’s rise in Bitcoin prices isn’t just about the increased likelihood of lower interest rates, but also about buying by investors who have accumulated huge Bitcoin holdings, aka “whales.” .

Crypto data firm Kaiko tweeted on Jan. 16 that trade sizes had risen from an average of $700 on Jan. 8 to $1,100 on crypto exchange Binance, suggesting renewed confidence in the market by whales. , reported CNBC.

Among the biggest whales are MicroStrategy CEO Michael Saylor and Silicon Valley investor Tim Draper.

Cryptocurrency skeptics have long believed that the market is prone to manipulation by a few investors with huge coin holdings. The top 97 Bitcoin wallet addresses account for 14.15% of the total supply, according to fintech firm River Financial. An estimated 46 million Americans (about 22% of the adult population) own a bitcoin share.

With declining trading volumes and a high level of fear in the market, whales could step in to bolster the Bitcoin market, University of Sussex professor Carol Alexander said in an interview with CNBC.

Bitcoin could see a “managed bull market” in 2023 with prices ranging from over $30,000 in the first quarter to $50,000 in the second half, Alexander said.

The upcoming Bitcoin halving, which is expected to take place between March and May 2024, is also generating excitement among investors, as such events have in the past.

“There are signs that this could be the start of a new cycle with Bitcoin, as it usually does around 15 to 18 months before halving,” said Vijay Ayyar, vice president of corporate development. and international at Crypto Exchange Luno, in a CNBC interview.

However, Ayyar said, “At this point we are in overbought territory with Bitcoin so we could definitely see some downside.” Prices could fall if Bitcoin closes below $18,000 in the coming days, he added.

Bloomberg Senior Commodity Strategist Mike McGlone said he believes Bitcoin could develop a “bottom” like it did in 2018 ahead of the 2019 bull run – with one big difference.

In 2018, financial institutions such as the Federal Reserve were easing interest rates while this time they’re still tightening, along with “all central banks,” McGlone said during a Jan. 16 interview with the podcaster. Crypto Scott Melker.

“At the time, the Fed had already started easing and we held the low and broke higher, and then we had this problem in 2019,” he said. “Right now they’re tightening aggressively, so you’re watching this and you can’t get too excited about the markets. Give it some time. Big picture, yes, Bitcoin really bullish.

Crypto market analyst Wendy O is unconvinced that Bitcoin has bottomed out this year. She expects Bitcoin to fall as low as $10,000 based on the coin’s history of correcting up to 85% in past bear markets. With an all-time high of around $68,000 in November 2021, an 85% correction would mean a low of around $10,000.

Bitcoin has several levels of resistance, O said, and it’s likely, based on his technical analysis, to see a volatile reversal to the upside before Bitcoin fully bottoms out in 2023.

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