the The price of bitcoin has fallen for most of 2022. The contagion has driven the entire clay market along with broader macroeconomic concerns, as well as a tense geopolitical climate.
This week, a sudden recovery underway, driving the BTC price up to $24,200. It has eased back slightly to around $23,200 at the time of writing, but that is still up just over 11% since the start of the week.
No Bitcoin not the only cryptocurrency a reversal of the downward trend. The reversal of Ethereum, the number 2 cryptocurrency behind bitcoin, was even stronger. He took the opportunity to announce back the date that had been set for the merger. This is the long-awaited transition of the network from a proof-of-work consensus mechanism to a less energy-intensive proof-of-work mechanism.
What are the reasons for the sudden increase in Bitcoin?
Many attributes of bitcoins rebound this week with investor optimism regarding the possibility reduce inflation. On July 14, Federal Reserve Governor Christopher Waller said that the market had “become a little bit” with talk of a 1% hike. Since then, there has been growing hope that the Fed’s tightening will be less severe.
The rally is largely due to the markets feeling that they have a good understanding of FED policy, hikes and quantitative tightening.
Mr Kaufman, head of market strategy at trading firm TheoTrade, explains. “The IS strong correlation between stock markets and bitcoin still important.”
Other factors come into play: In recent months, multiple crypto funds and leveraged firms have gone bankrupt, triggering a wave of liquidations in the space that has accelerated the price drop. Matthew Liu, co-founder of Origin Protocol, a decentralized finance and NFT platform, said that “the rise of bitcoin is mainly due to the remove leverage in crypt.”
In the last few months, we have seen the collapse of the Terra blockchain and the insolvency of major crypto firms, such as Celsius and Voyager, as well as crypto hedge fund Three Arrows Capital. “These companies and systems were all interconnected. Their fall was widely reflected in the market. Now that these irresponsible leveraging behaviors have been removed from the system somewhat, enterprises have some market participants. risk on“, Mr. Liu added.
Bitcoin volatility
Volatility and Bitcoin go hand in hand, but this week’s price rebound is accompanied by a decline in volatility. In fact, the 30-day metric has dropped from 75% to 50% over the past seven days. It is still high, however, and bitcoin volatility is known for its sudden jumps. With the geopolitical climate still highly unpredictable and investors wary, there is no guarantee that this trend will materialize. Liu says:
The volatility should be much lower than in May and June, when we saw catastrophic corrections in bitcoin and ethereum. There will still be short- and medium-term turmoil and unpredictability, but the deep corrections that lead to mass capitalization are almost over.
What does this recovery mean for investors?
The big question plaguing investors is whether this is a sign that Bitcoin is suffering or the safe haven is just a Bounce a dead cat – when prices temporarily rebound in the middle of a longer-term negative trend, only to resume the fall. According to analysts, the market is waiting for the next Federal Open Market Committee (July 26 and 27), and it will avoid large movements by that time. This seems to be the consensus opinion at the moment.
While the reversal of relief was welcome, and while the catastrophic wave of sell-offs is unlikely to recur on the same scale, the geopolitical climate, subdued inflation and the Fed’s stance on interest rates still leave room for maneuver. great uncertainty. Even under the best conditions, it is almost impossible to predict the short-term price development of digital assets. This is especially true in this market environment.
Even if this price increase represents a welcome haven for investors, bitcoin is still down 52% on the year, after starting 2022 at just over $46,300. It is even worse if we compare the current price with the ATH of almost $68,800 reached in November 2021.
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