In the midst of a gloomy winter at the beginning of the year, bitcoin was in bad shape after 2022 marked by falling cryptocurrency prices, company scandals, and bankruptcies.
In fewer than three months, bitcoin has regained its luster. It has outperformed other significant commodities this year with gains of over 70%, and on Wednesday, it was trading close to its highest level in nine months.
The first and largest cryptocurrency has been through this before; over its 15-year existence, it has experienced both dizzying price increases and drops. Interest rates are driving the increases.
Also Read: Why Google suspended China’s Pinduoduo app?
According to six investors and analysts from the crypto and conventional finance industries who spoke to Reuters, markets anticipate that central bank increases in the cost of credit are reaching their peak, which is expected to support risky assets like bitcoin.
Other factors are also in play, such as the banking industry’s unrest and persistent but unfulfilled hopes that bitcoin will become a widely accepted method of payment. On Sunday, Bitcoin recorded its greatest week in four years and has since increased by 45% in just 12 days.
Suggestions that bitcoin is an asset resistant to risks in conventional finance have gained momentum as the failure of American firms Silicon Valley Bank and Signature Bank served to prompt the takeover of 167-year-old Credit Suisse by competitor UBS on Sunday.
According to Usman Ahmad, CEO of Zodia Markets, a cryptocurrency exchange run by the venture arm of Standard Chartered and Hong Kong-based BC Technology Group, “It’s rather narrow-minded to say that bitcoin is going to succeed because a bank failed. But confidence is almost a critical factor – confidence in the banking system has been damaged.”
Significant changes in bitcoin’s price in the past have been closely related to changes in global monetary policy. Stay-at-home investors fueled a six-fold gain for bitcoin between September 2020-April 2021 as stimulus measures inundated the worldwide financial system during the COVID-19 pandemic.
These actions, combined with growing interest in cryptocurrencies from bigger investors and businesses, led proponents of the technology to proclaim that there was less chance that it would experience the violent crashes that have historically occurred after bitcoin rallies.
Bitcoin, however, fell by over fifty percent from the all-time high of $69,000 in merely 75 days as rates started to rise as signs of rogue inflation late in 2021 drove central government agencies and banks to curtail stimulus packages.
Also Read: With GPT-4, are we one step closer to losing our jobs?
The decline of a significant crypto token in 2022, brought on by higher interest rates, caused the closure of significant hedge funds and crypto lenders, and a drop in bitcoin of over 65%.
Regulatory issues and the abrupt collapse of the FTX market further battered it. Despite the claims of its supporters that bitcoin is a secure haven asset in periods of economic and political stress, the disastrous year served as another warning of its susceptibility to outside shocks.
I am a law graduate from NLU Lucknow. I have a flair for creative writing and hence in my free time work as a freelance content writer.