Why is the price of Bitcoin rising again?

It starts well with Bitcoin. Within days, the price of the cryptocurrency rose above the symbolic threshold of $20,000, stimulating the entire digital asset industry. We calculate the causes and consequences of growth.

Over the past year, the price of bitcoin has gradually declined. The queen of cryptocurrencies ended the year after the consecutive disappearance of several pillars of the ecosystem, including the FTX platform and Terra Labs UST. Under $20,000, at the gates of $70,000, far from its all-time record at the end of 2021. For the first time since late 2020, Bitcoin has traded around $17,000 for several weeks.

Also Read: Why ChatGPT’s Success Is Exploding Some Cryptocurrencies

Bitcoin’s Big Comeback?

After a dark year, Bitcoin started 2023 with a bang. Digital currency lived 30% meteor rise From January 11. After struggling for weeks between $16-17,000, the cryptocurrency rallied over the weekend. Within days, bitcoin surpassed $20,000, reaching an all-time high at the end of 2017.

The price of Bitcoin is going up. © CoinMarketCap

BTC is currently trading around $21,000. This is the first time since the summer of 2021 that the price of Bitcoin has accumulated so many days in the green. Most cryptocurrencies are seeing a similar rise. For example, Ether gained 20% in a few days, taking the price to just above $1,500. The currency is far from its 2021 all-time high of $4,500. Watch out for the meteoric rise of Solana (SOL), which is using the Bonk cryptocurrency launch to regain its color.

cryptocurrency market price
The evolution of the cryptocurrency market valuation in the last seven days. © CoinMarketCap

The cryptocurrency industry, led by Bitcoin, is back 1 trillion dollar mark. The total capitalization of the ecosystem now hovers around this threshold. As of this writing, the market cap is estimated at $995 million by CoinMarketCap.

Not surprisingly, this unexpected rebound brings a smile to bitcoin miners. The crash severely damaged the profitability of mining farms and pushed some players to their limits. Some of the industry’s flagship companies listed on the stock exchange suffered greatly from the market downturn. Back to the wall, the giant Core Scientific also declared bankruptcy.

Glassnode’s latest report says that thanks to the upswing, miners have been able to rebalance their operations. The blockchain analysis firm estimates that the average cost of producing one Bitcoin is about $17,962, which creates a nice margin for miners. If the price falls below $17,000, the industry could face challenges again, Glassnode warns, however.

Also Read: Why ChatGPT’s Success Is Exploding Some Cryptocurrencies

Bitcoin mimics the economy

Despite its ambitions as a safe haven, Bitcoin is currently far from over associated with traditional finance. Cryptocurrency generally experiences a rebound when stock indices rise again. This is exactly what is happening right now. The price simply reacts to the rise of certain reassuring indicators for investors and traders.

After a gloomy 2022, the global economy is indeed showing promising signs. The steps taken by the US Federal Reserve are visible prevented inflation. According to figures from the US Department of Labor, inflation fell from 7.1% in November to 6.5% in December. Inflation reached 9.5% in June, breaking a sad forty-year record.

“A mix of news, including a slowdown in US inflation, cheered markets, but the recovery in cryptoassets has been more energetic than other asset classes”eToro analyst Simon Peters explains.

In parallel, stock indices are shown in green. Last Friday, the three main indices of the New York Stock Exchange ended the week with monthly records. In general, the world economy appears to have at least briefly recovered from the year-long recession. In this context, analysts expect a stabilization phase, which will affect the riskiest assets, including cryptocurrencies.

“Short-term traders have been cautious, which may cause prices to stabilize in the short term.”A report from Arcane Research dismisses the prospect of an imminent fix.

Meanwhile, Bitcoin mining difficulty hit a new record last weekend. As every two weeks, the difficulty adjusted to the computing power available on the network. This shows that there is an increase great competition among miners, which enables blockchain transactions. As Simon Peters explains, this a “is a long-term positive indicator »:

“is about […] during or after bearish episodes, a common signal when bottoming and development continues despite falling prices.

Forecasts for the end of 2023

In this context, some analysts do not hesitate to prophesy the great return of the bull run, a strong bull phase in stock market jargon. For Bloomberg analysts, King Bitcoin could have a good year, especially taking advantage of an economy marked by geopolitical tensions. Asked by CNBC, billionaire Tim Draper expects Bitcoin to reach $250,000 by the end of the year.

Other observers want to be more cautious. They predict that the market will not break new records before horizon 2024, despite its recent recovery. Bitcoin may still go down by next year. For Standard Chartered bank, it is possible for the currency to collapse around $5,000, pointing to the fragility of players in the ecosystem:

“More and more companies and cryptocurrency exchanges are experiencing insufficient liquidity, leading to future bankruptcies and a collapse in investor confidence”.

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