Bitcoin is up 43% in a Month, but why?
Does this signal the crypto winter is letting up? Not exactly.
Hey Guys,
So with the NASDAQ correlection more entrenched, Bitcoin’s price has gone up with the 2023 rally.
We’re still in a crypto winter but this is an interesting element to watch. It’s still a far cry from the cryptocurrency’s $68,990 record high in November 2021. But it has given market players cause for some optimism.
The current price is 23,666.30, up roughly $7,000 in just the lats month or first month of 2023.
The past is littered with various periods of market turmoil, from the global financial crisis of 2007-09 to the COVID-19 collapse in 2020. I’m not even sure we saw the bottom of Bitcoin’s price in this bear cycle.
$15,000 is as low as it was meant to go? The FTX fraud really took a trust hit out of crypto and Bitcoin culture. The crash of more mainstream crypto brands is not only possible, but likely.
There was so much news around FTX and there’s a lot of collateral damage. It might take months or even years more to know the full extent. Suffice to say that the reputational damage caused by this could extend the crypto winter longer than crypto pundits care to admit or powerful executives like the CEO of Binance.
Analysts say that a number of factors are behind bitcoin’s New Year rise, including an increased probability of interest rates being lowered, as well as purchases by large buyers known as “whales.” But really it’s just the new normal behavior of being correlated with the NASDAQ (tech stocks).
Bitcoin’s volatility has been pretty significant in the pandemic cycle. I expected to see Bitcoin retreat below $10k, so far we haven’t seen that. Bitcoin above $20k may be coming some a false sense of security.
The striking similar to the NASDAQ is a bit disconcerting when Bitcoin was supposed to be the “hedge against inflation”.
With NFT hype chilled, it’s not clear what the next hype trend will be in crypto.
Given the supposed 2023 stock recovery it’s also to me more bull market relief theory that could easily fall apart. Inflation is cooling down, and economic indicators suggest slowing U.S. economic activity. That’s made traders optimistic the Federal Reserve could reverse, or at least soften, its rate hiking strategy. So in a sense, Chinese Reopening is also responsible for Bitcoin’s recent pump, if you think of the macro elements that make sense.
The problem is the VC reality is a new normal, with the cost of capital so much higher crypto startups won’t be seeing fresh funding rounds anytime soon. The Earnings winter to come on the stock market this week with even poorer guidance points to the crypto winter continuing for quite some time. The long it goes on, the more big Crypto brands basically burning cash, start running out of money and doing even more layoffs.
The price of Bitcoin will fluctuate regardless.
I don’t pretend to fully understand the real relationship between inflation and the price of Bitcoin outside of NASDAQ correlation and investor sentiment. The CPI report showed inflation easing for the sixth straight month. One of the largest decreases in the report was the sharp drop in gasoline prices. Used and new car prices were also down. The caveat in the CPI report is that the cost of services and food remained high.
Investor confidence and sentiment however if a fickle thing. With Earnings compression (margins and revenue) taking place, and more layoffs ahead, many of those will be impacting bloated and over-funded crypto startups with no or hardly any revenue, a common story for the crypto realms.
At least that’s how I see it.
Thanks for reading!