The price of cryptocurrencies like Bitcoin and Ethereum have recently increased, igniting an old argument about whether a market recovery might be on the horizon or if recent patterns are simply the start of more pain.
Since Bitcoin’s all-time high of almost $69,000 in November 2021, increased interest rates and a string of high-profile catastrophes, including the demise of companies like FTX, have devastated the value of digital assets.
Digital assets, along with other investments like stocks, have enjoyed a successful start to the year, despite the fact that Bitcoin is down over 67% from its peak.
At $22,858, the price of one bitcoin is at its highest level since last August, up 38% so far this month.
In contrast, CoinGecko reports that the value of Ethereum’s ETH has increased by about 38% to $1,645.
Early this month, cryptocurrency prices started to increase in anticipation of a report on the economy that indicated that inflation had decreased in December.
The reading raised optimism that the Federal Reserve would raise interest rates less firmly than it has in the previous year in an effort to rein in skyrocketing costs.
However, the prudent advice is to be cautious.
The recent price increase, in the opinion of many cryptocurrency pundits, is too good to be true. They are calling the rise a bull trap and forecasting that traders who accepted the breakout as the start of a new upswing would lose money when it crashed down.
Others who are watching the event are similarly dubious.Over 18,000 people agreed in a Twitter survey run by a well-known Bitcoin page that the surge was really a bull trap.
Although JP Morgan’s analysts’ research report on Friday was unable to confidently explain the rise in cryptocurrency prices, it did concede that market conditions for riskier assets had improved, citing the recent release of the inflation data.
Some Wall Street analysts are likewise baffled by the price increase.
We don’t have a good explanation for the crypto surge that has occurred since January, but we do believe that it is indicative of the continued faith that many people still have in cryptocurrencies.
The cryptobulls and whales appear to have gained a new lease on life.