A sudden rise in cryptocurrency prices, including Bitcoin and Ethereum, has sparked an old discussion over whether a market comeback is near or if current patterns are merely a prelude to even greater agony.
Digital assets have taken a significant hit since Bitcoin peaked in November of 2021 at around $69,000, largely due to rising interest rates and significant bankruptcies, such as Three Arrow Capital and FTX.
While Bitcoin has fallen about 67% from its high, cryptocurrencies, as well as conventional investments such as equities, have enjoyed a strong year so far. Bitcoin’s price has increased 38% this January to $22,858, a level not seen since late August. At the same time, Ethereum’s value has risen almost 38% to $1,645, as CoinGecko’s data shows.
Prices of digital currencies rose earlier this month as investors anticipated a report indicating a cooling in inflation in December. The number also raised optimism that the Fed’s stance on interest rates will be more dovish than in 2022.
However, many crypto analysts are predicting bad news is to come: the current rise in prices may prove to be a bull trap, crashing down on investors who erroneously believe it’s the start of a rising market.
On January 15th, a Twitter poll carried out by a popular Bitcoin page showed that over 18,000 people agreed that the price surge was, in fact, a bull trap.
A few days ago, “il Capo Of Crypto,” a notable influencer and self-proclaimed crypto expert, concurred with the pessimistic viewpoint, claiming that the surge “clearly looks manipulated” and is the greatest bull trap the crypto market has ever seen.
Cautious sentiments about cryptocurrency were echoed on Reddit, where users disputed an article’s assumptions about a market bottom.
Also, Jim Cramer, the host of MSNBC’s Mad Money, wrote on Twitter that cryptocurrencies are a “sham market” and the recent recovery is a “manipulation.”
The inconsistent accuracy of Cramer’s analysis throughout time has prompted various memes and the creation of accounts such as the “Inverse Cramer ETF,” a fictitious Exchange-Traded Fund with recommendations contrary to Cramer’s.
The MSNBC host’s negative outlook on Wednesday was taken as a sign of optimism by many users, including Dan Held, Kraken’s former director of growth marketing, who responded, “Bottom is in!”
In the wake of Bitcoin’s recent pumps, a number of popular Twitter accounts predicted a cryptocurrency bull market. Some members of the community are taking this opportunity to criticize those who are convinced that the losses for cryptocurrencies will be more serious.
Some Wall Street analysts have also been perplexed by the price increase.
According to a JP Morgan report released Friday, the experts found it difficult to explain the price spikes; however, they noted that market climate for riskier financial instruments had improved following the release of the inflation data.