After a rough start to the year, Bitcoin (BTC) appears to have leveled off this week, and some analysts are predicting prices could rise.
Bitcoin has appreciated 1% since Sunday (9), after falling almost 12% in the first week of 2022. Compared to the first week of 2021, when the cryptocurrency rose 15% and traded above $50,000, the The move looks small, but experts say it could be a rehearsal for the bull.
Prices will likely recover from the current level of around $42,000, but should remain in the $40,000 to $60,000 range, said Gavin Smith, CEO of Panxora.
“This would prepare Bitcoin for a move to new highs later in the year,” he said. “We anticipate the catalyst for this move to be stubbornly high inflation numbers, along with a continuation of negative real interest rates.”
A “real” interest rate is adjusted for inflation. Therefore, when the value is negative, it means that consumer prices are rising faster than benchmark bond yields. Expansionary monetary policies implemented by central banks around the world have encouraged risk taking, as investors are effectively losing value by holding bonds and other fixed income instruments.
The U.S. Department of Labor said on Wednesday that the Consumer Price Index (CPI), a widely used indicator of inflation in the country, rose 7% in the year ending in December, from 6 .8% in November. That’s the biggest annual increase since 1982.
While BTC has recovered after falling below $40,000 on Monday, this improvement is nothing by cryptocurrency standards, according to Craig Erlam, a senior market analyst at Oanda.
“If Bitcoin manages to break above $45,500, we could see another sharp bullish move as belief begins to grow that the worst of the crash is over,” he wrote in a daily bulletin Thursday.
Risk asset or inflation protection?
The Dollar Index (DXY), an index that shows the dollar’s change against a basket of six major global currencies, has dropped 0.97% over the past five days, a move that is generally considered bullish for BTC and other asset prices. denominated in dollars.
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“This is certainly good for risky assets and it has become increasingly evident that BTC falls into this group, at least for now,” said Lucas Outumuro, head of research at IntoTheBlock.
Bitcoin “has been behaving more like a risky asset recently amid market uncertainties,” said Lennard Neo, head of research at Stack Funds. “Markets are still divided on whether BTC is an inflationary hedge or a risky asset, and with the current macro climate, expect more volatility in the short term.”
Whether Bitcoin is viewed as a risky asset or a hedge against inflation depends on location, according to Jason Deane, an analyst at Quantum Economics.
In developed economies, BTC is seen as a risky asset and is being traded based on macroeconomic developments such as inflation and central bank stimulus programs, Deane said. In developing economies such as Turkey, Brazil and Argentina, cryptocurrency better fits the role of hedging inflation.
“As a result of this, the direction is unclear and we expect unpredictable and erratic movement in a wide lateral range for now,” Deane said.
Looking at the long-term price of BTC, Deane predicts continued growth, development and adoption on a global scale.
“At some point this will become the dominant narrative and will almost certainly lead to new price discoveries down the road,” Deane said.
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