Bitcoin and other cryptocurrencies sank Wednesday, matching the stock market, as digital assets remained susceptible to macroeconomic influences. However, encouraging signs show that cryptos are increasing, addressing our fundamental question: is Bitcoin a good investment?
Bitcoin‘s price had fallen 2% in the last 24 hours to $29,100, sliding below the psychologically important $30,000 level – where prices stood in June before the crypto selloff turned into a terrible bear market. Last week, the largest digital asset surpassed $30,000, momentarily hitting approximately $31,000, but has yet to consolidate gains or go higher amid signs of profit-taking.
“Bitcoin appears as if it might consolidate here, but a rally above $31,500 could open the door to some momentum trades,” said Edward Moya, an analyst at broker Oanda.
Last year’s spate of major rate hikes by the Federal Reserve in a bid to halt decades-high inflation dampened demand for risk-sensitive assets, smashing both cryptos and stocks. Concerns over inflation and the prospect of additional interest-rate hikes pulled prices lower in the short term, pushing down the Dow Jones Industrial Average and the S&P 500. While Bitcoin’s rise this year has corresponded with Fed predictions of looser monetary policy, the narrative remains vulnerable.
Comments by St. Louis Federal Reserve President James Bullard, who called for higher rates again on Tuesday, were among the most recent indicators undermining market confidence in the possibility of monetary policy loosening.
However, there are also encouraging signs for Bitcoin, which has already recovered 80% this year in a rise from its “crypto winter,” spurring expectations of a new bull market for digital assets. Bitcoin experienced its best quarterly performance since hitting an all-time high in late 2021, providing a favorable response to the question, “Is Bitcoin a good investment?”
According to analysts at crypto market analytics business Glassnode, the robust market performance in 2023 is a dramatic contrast to 2022 and signals a positive regime transition is happening.
In addition, he asserted that various on-chain signs indicate that bear market circumstances, or at least the worst of them, are now behind us, pointing to blockchain network data covering individual Bitcoin deals, which researchers meticulously studied since it was remarkably consistent.
In general, Bitcoin is in “neutral territory,” according to Glassnode, maintaining above the $16,000 to $25,000 region where significant Bitcoin volume has changed hands. “We note that much of this supply remains tightly held by those buyers while profits are being taken and network utilization is improving, all of which support the strong market performance,” the analysts said.
Beyond Bitcoin, Ether, the second-largest cryptocurrency that has excelled since the Ethereum blockchain underwent a significant update last week, has fallen 5% to below the $2,000 mark. Dogecoin and Shiba Inu both lost 6%, so Memecoins were not spared. Cardano and Polygon, two minor cryptos, also lost 6%.