The euphoria in the crypto market is back. After a difficult 2022, which was dominated by price drops, crypto exchange collapses and legal investigations against industry representatives, the situation is now looking much brighter again.
The big mood driver is of course the sharp rise in prices for Bitcoin and other cryptocurrencies in the first few weeks of the year. But the falling inflation in recent months gives investors in the financial markets hope that the hard times of 2022 are now over.
The Fed’s interest rate policy could drive Bitcoin’s course
Many expect America’s Federal Reserve to end its tight interest rate policy as well. With sharp increases in interest rates of 0.75 basis points several times and recently 0.5 basis points, the central bank left the days of zero interest rate policy behind and recently pushed the key interest rate to 4.5 percent.
As soon as next week, on February 1, 2023, the central bank will announce the next interest rate adjustment. Most analysts are only expecting an increase of 0.25 basis points. Others are even expecting a complete freeze on interest rates given the falling inflation in recent months. Few, however, expect the Fed to be brave enough to cut interest rates again. Because the goal of pushing inflation down to 2 percent is far from being achieved.
If the expectation is met with an increase of 0.25 basis points, the market should at least not react negatively. If the expectation is exceeded, this could provide the next impetus to the current rally and drive prices even higher. However, no Bitcoin bull wants to believe in a situation where interest rates are higher than expected. Because this could trigger a significant correction in the markets.
Trader Plan B predicts a 75 percent increase
Very research statements regarding the further trend of Bitcoin are currently coming from the well-known trader and analyst Plan B. On Twitter he put forward the thesis that it is not impossible that the price will reach the $ 40,000 mark in 2 weeks. He referred to the price development between December 24, 2020 and January 7, 2021 when BTC/USD recorded just such an explosive rally from around $22,700 to $40,400.
If Bitcoin were to repeat this rally, it would represent a price increase of about 75 percent from current levels. Compared to the low point of November 2022, it would be worth a growth of 160 percent in about 3 months. Furthermore, BTC/USD would see prices at which Bitcoin was last listed in April 2022 – ie almost 10 months ago.
Plan B substantiated his bullish thesis by stating that the price of Bitcoin would now be above the realized price again. This means that the majority of Bitcoin owners are in the black. As a short-term price target, the analyst specifies the $32,000 mark, where the price has been realized in two years. This would mean that many Bitcoin buyers who only bought in the last 2 years would be in the black again.
From $22k to $40ki 14 days.. not impossible🚀
December 24, 2020: BTC $22,700
January 7, 2021: BTC $40,402 pic.twitter.com/Eqjir6GkIz— PlanB (@100trillionUSD) January 25, 2023
A forecast of $100,000 per Bitcoin was not fulfilled
If you look at the momentum of the Bitcoin price, which has already risen almost 40 percent in the first few weeks of the year, the scenario outlined in Plan B does not seem completely unrealistic. However, there are also some points on you should be wary of whether the bulls are that strong right now.
First of all, one should also classify that the Plan B analyst was not always right with his very dovish forecasts for Bitcoin in the past. Plan B has received a lot of attention with its stock-to-flow model, which describes the development of Bitcoin prices due to its increasing demand.
And in the bull market of 2021, he was right with his price pattern for a relatively long time. However, Bitcoin ultimately failed to continue the parabolic movement that Plan B had anticipated. He soon advanced the thesis that Bitcoin would rise to at least $100,000 in 2021. A more recent forecast model from Plan B gave even higher price forecasts. Accordingly, Bitcoin could have already reached some 100,000 dollars. Even with the continued rally in 2021, Plan B remains confident that Bitcoin will reach $150,000 by the end of the year.
We now know that his estimate was too high. With an apparent price of around $69,000, BTC remained far from the stated minimum target of $100,000. Many well-known analysts and crypto influencers were also brought down when Bitcoin started the major correction at $69,000 and even fell back to $15,500 in the bear market.
Therefore, it can be assumed that Plan B is perhaps a little too global in its forecasts and therefore exceeds realistic price targets. But there are also other factors that speak against the fact that bitcoin will cost $ 40,000 again in just 2 weeks.
#bitcoin broke through realized price.. next target 2Y realized price ($32K). Discuss realized price here: https://t.co/TfBmYdxHNz pic.twitter.com/nvO9I2MyzA
— PlanB (@100trillionUSD) January 26, 2023
The current situation is not comparable to Bull Run 2021
The most important point is that the market environment and mood has changed significantly since 2021. Even if easing is possible now, inflation has not gone away and the war in Ukraine has not ended.
Events such as the fall of the crypto exchange FTX and the crash of the Terra (Luna) project, with a collapsed stablecoin, also destroyed a lot of investor confidence and affected the image of the crypto market. This cannot simply be brushed off with a nice spring close and investors will forget about it.
In 2021, on the other hand, the environment was much better. Institutional investors such as Tesla and MicroStrategy bought into the market for billions of dollars, PayPal integrated Bitcoin as a payment method and new business areas such as DeFi, NFTs and Metaverse had real hype.
Is the rally a bear trap?
Bitcoin still seems to be a long way from this state of unbridled euphoria these days. In addition, there are some technical chart indicators that even question whether the market is really over, as kryptoszene.de recently analyzed using different chart signals.
Until the price of bitcoin breaks more key resistance and clears the highs from the 2022 bear market, it could be a mark market rally. The coming weeks will show how sustainable the current increase really is. The interest rate decision on February 1 could already be a decisive factor for the short-term trend.
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