- After a torrid start to the new year, Bitcoin has stabilized slightly and is once again on the green, gaining 2% in the past day.
- A number of analysts say that this stabilizing is critical for Bitcoin and some believe that it will set up the crypto to regain its former glory and head towards $60,000.
After one of its worst starts to a new year, Bitcoin seems to be stabilizing once again. The top cryptocurrency is trading above $43,000 and has gained over 2 percent in the past 24 hours. While it has yet to recover much of the ground it lost recently, analysts claim that this is a good starting point and could set BTC up for a comeback. Some even predict that it won’t be long before it starts testing the $60,000 price again.
At press time, BTC is trading at $43,140, up by 2.01 percent in the past day.
Ever since it dipped below $40,000 on Monday for the first time since August last year, BTC has staged a comeback that analysts now believe will be the catalyst that sees it fight its way back to previous highs.
According to Craig Erlam, a senior market analyst at Oanda, all that Bitcoin needs is momentum. In his daily newsletter, he stated:
If bitcoin can break $45,500, we could see another sharp move higher as belief starts to grow that the worst of the rout is behind it.
The tailwinds for Bitcoin include the rising economic uncertainty, high inflation, and a drop in the U.S Dollar Index which is down by close to 1 percent in the past week. A drop in this index usually bodes well for assets that are considered risky, and Bitcoin has been falling squarely into this category in recent months.
Lennard Neo, the head of research at Stack Funds, a cryptocurrency investment company, stated:
Bitcoin has been behaving more as a risk asset recently amidst market uncertainties. The markets are still split if BTC is an inflationary hedge or risk asset, and with the current macro climate, expect more volatility in the short term.
Neo’s comments revive a debate that has raged on in the BTC community – is Bitcoin a hedge against inflation or is it a risk-on asset. Over the years, the narrative has been that BTC is digital gold, a solace from the market condition. Many companies have bought millions of dollars worth of BTC predicated on this narrative, including the ever-bullish Microstrategy.
But data from recent days paints a different picture. Bitcoin has been strongly linked to risky assets, with its price movements correlating with the normal macroeconomic conditions. For instance, when recently the U.S Federal Reserve revealed it was winding down its cash injection into the economy, riskier assets faced a sell-off and Bitcoin was not exempted. In fact, this was a key factor for the dip below $40,000 earlier in the week.