Is Bitcoin on the rise again? Here are 2 things to know before investing

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For the first time since November 7, 2022, the flagship cryptocurrency, Bitcoin, showed some signs of recovery. The cryptocurrency, which had been trading below $17,000 since FTX was issued, rose above $21,000 on Thursday, January 14, 2023.

As expected, traders, investors, and enthusiasts were excited to see the little ray of sunshine even though it is a far cry from the $68,000 price the cryptocurrency crashed from.

The value of the entire crypto market rose to $990 million, up 19% from $831 million in November 2022.

Crypto influencer and full-time trader Ademi said the rise is likely due to a reduced supply of bitcoin and ethereum in the market. CNBC corroborated Ademis’ position, saying that there has been a huge buyout of the cryptocurrency by large buyers known as whales.

For Ademi, the current rise in the price of bitcoin is a breath of fresh air after a long crypto winter. Although she is optimistic that prices will continue to rise, she admits that it is impossible to say whether this is the start of another bull run or a brief moment of happiness for traders. like her.

Bitcoin price over the past month. Source: CoinMarketCap

Green lines on the crypto chart could be a sign to enter the market and make a profit. However, it is necessary to understand why the market is rising and if it is sustainable.

Here are two things you need to know before investing in crypto Why is the crypto market on the rise?

According to Micheal Ugwu, CEO of angel investor FreeMe Digital, bitcoin is on the rise because economic measures in the United States were not as bad as expected. For example, the inflation rate has risen from 7.10% to 6.5%, making traders optimistic about lower interest rates.

In the past, Bitcoin was a way to hedge against inflation, but in 2022 it didn’t. The cryptocurrency behaves similarly to the stock market by playing to the tunes of micro factors and macroeconomics.

The increase was also attributed to whale activities. These are people or entities that buy large enough amounts of cryptocurrencies to move the market.

According to crypto data firm Kaiko, trade sizes have increased from an average of $700 to $1,100 on Binance.

Micheal Saylor, CEO of Microstrategy, is a well-known crypto whale who bought $45 million worth of Bitcoin in December 2022. When whales sweep cryptocurrencies in large volumes, it reduces the supply of crypto, which leads to an increase in prices.

The third reason for the rising price of bitcoin is the increasing difficulty of mining. Data from BTC.com revealed that the mining difficulty is now 37.6 trillion, which means it will take 37.6 trillion tries to find a valid bitcoin block and add it to the blockchain.

Such metrics make cryptocurrency harder to mine, increasing its scarcity and price.

Will the factors affecting bitcoin’s rise stay the same?

While some economic factors are going well for bitcoin, that doesn’t mean things will stay the same. According to Ugwu, the economic situation in the United States does not change the macroeconomic conditions, which will affect the crypto in the long term.

According to the World Bank, the global economy is expected to grow by 1.7% in 2023, a marked slowdown in growth. Judging by what happened in 2022, this figure could be worse than the World Bank’s prediction.

On January 10, 2022, the World Bank warned that “the global economy is ‘dangerously close to falling into recession’.

Worse still, the recession envisaged by the World Bank will be widespread, with everyone, everywhere experiencing a significant slowdown in their incomes.

It is the macroeconomic factors that make Ugwu believe that the rise in bitcoin price will be short-lived.

He said, ‘everything sucks, and I don’t mind; all I know is that it’s probably short term.”

While crypto whales might pick up enough coins to drive prices up, economic conditions across the world do not bode well for the crypto market. History, however, shows that when it comes to crypto, there is no telling what will happen.

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