A high-risk investment in a context of inflation and recession

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Bitcoin price is making all-time highs and has reversed to hit strong support at $17,000. The Federal Reserve’s efforts to fight inflation by raising interest rates are ineffective. Bitcoin is facing significant resistance at $28,000.

Bitcoin is a decentralized digital currency that allows peer-to-peer transactions without the need for a central authority. It was created in 2009 by an individual or a group of individuals using the pseudonym Satoshi Nakamoto.

Bitcoin is often seen as an alternative investment and its price can be very volatile. Despite this, many people and institutions have invested in it as a hedge against traditional markets and as a way to gain exposure in the growing cryptocurrency market. However, it is important to note that investing in Bitcoin is considered a high risk investment and should be approached with caution.

Due to the current economic downturn and rising inflation, along with the growing acceptance and awareness of bitcoin in various regions, the general public’s interest and curiosity about bitcoin has increased, leading to an increase demand and a price that topped $64,000 in 2021. Bitcoin’s attempt to reach $64,000 failed and the price reversed within a few months to reach strong support at $17,000.

How Bitcoin acts during the recession

Inflation has surpassed the 40-year high and will peak in 2022. The Federal Reserve’s efforts to raise interest rates above 4% caused the CPI to correct to 6.42%. However, inflation remains extremely high and out of control. The negative yield curve below zero also suggests that a recession could occur in 2023.

During a recession, the price of Bitcoin and other cryptocurrencies can be affected by a variety of factors, such as changes in investor sentiment, government regulations, and general market conditions. In some cases, the price of Bitcoin may fall as investors flock to more traditional safe-haven assets, such as gold or government bonds. Although, in other cases, the price of Bitcoin may rise as investors see it as a hedge against inflation or a way to store value outside of traditional financial systems. Overall, the relationship between Bitcoin and recessions is complex and can vary depending on specific circumstances.

Since the US Dollar has already reached the strong technical target on the long-term chart and is expected to decline, the value of Bitcoins should rise. Since Bitcoin is not owned by the government, there is no direct correlation between it and inflation. However, Bitcoin in relative currency is affected by relative currency strength or weakness.

Technical image of Bitcoin

The chart below illustrates monthly market levels for Bitcoin, suggesting volatile price action. The chart depicts a double top that was broken at $28,000. As soon as the neckline is broken, the price reaches $17,000, also known as strong support.

Bitcoin is currently bouncing off a region of strong support, and immediate resistance lies at $28,000. Any violation of $28,000 will signal a breakout and lead to a search for higher prices. However, a break from $17,000 would indicate a strong breakdown, and expect a drop to $13,500 and $3,500.

Conclusion

In conclusion, higher inflation can have a positive effect on Bitcoin, but there is currently no direct relationship between inflation and Bitcoin. However, the price of Bitcoin may increase due to economic weakness in the United States, and some investors may view Bitcoin as a hedge against inflation, which may impact demand.

In other words, inflation can affect the value of a currency and the economy, which can affect the demand for Bitcoin. Currently, the probability of a recession in 2023 is increasing. Bitcoin is moving from the strong support level of $17,000 to the immediate resistance level of $28,000, which will act as a strong resistance. A breakout of $28,000 is needed for Bitcoin prices to resume the uptrend.

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