After a few months of uncertainty and shrinking prices, the prices of Bitcoin and other cryptocurrencies jumped up this week. And some are asking why. One reason could be that there’s less market competition on the horizon.
It’s not uncommon for the price of Bitcoin to fluctuate wildly at random intervals, but there are some forces at work that explain why it might be rising or falling more than usual. In this case, it’s probably because there are fewer competing coins around now because of the slump seen last year mainly due to the FTX scandal which rocked the crypto industry.
But a lot has changed in the last year. Cryptocurrency prices have fallen sharply, and regulators around the world have started requiring others to comply with securities laws. Cryptocurrencies are still relatively new and volatile, but they are also beginning to attract more attention from investors who want exposure to digital assets but aren’t interested in buying bitcoin and cryptos directly. These investments include two exchange-traded funds (ETF) that hold baskets of blockchain startups, as well as actively managed mutual funds focused on cryptocurrencies and blockchain technology companies that trade on private exchanges.
Bitcoin’s price has surged over the past few days, surpassing USD 17,000 for the first time since early December
Bitcoin’s price has surged over the past few days, surpassing USD 17,000 for the first time since early December. It’s not just bitcoin that is experiencing a strong rally; other top cryptos are also posting big gains like Ethereum, Ripple, Litecoin, Bitcoin Cash, Cardano, and even Dogecoin.
This rise might be due to recent announcements from U.S. Federal Reserve that it is prepared to cut rates by as much as 50 basis points in the event of a slowdown in the economy. Fed Chairman Jerome Powell said that “the committee judges that some further policy firming may be needed to ensure sustained growth of inflation on a trajectory consistent with its mandate”, which is exactly what the market was looking for: more clarity about how aggressively they will cut rates if there’s another economic downturn.
This rate cut would stimulate lending activity and increase spending, which would boost economic growth and lower unemployment rates—all things that are good for Bitcoin.
Markets have been spooked by low interest rates and negative yields on bonds, which may cause investors to seek alternative investments
Another reason is more speculative. Investors may be looking for alternatives to traditional asset classes as interest rates continue to decline and bond prices fall.
Interest rates are low because the Federal Reserve has been raising them over the last few years, but it’s unclear if that trend will continue. In the meantime, many investors have exited bonds and moved into stocks because they want to take advantage of higher returns from shares of stock.
Cryptocurrencies can be seen as riskier assets partly because they are relatively new and volatile. While the price of Bitcoin has increased over time, it is not yet a mature asset class, and its value can fluctuate dramatically from day to day. That’s why you should decide whether you’re willing to take on that risk before investing in cryptocurrency.
The risk of trading cryptocurrencies is higher than traditional assets such as stocks or bonds because there are fewer regulations surrounding them and less history to guide investors’ decisions. However, this also means that cryptocurrencies may potentially offer greater returns than other types of investments if you know what you’re doing!
Despite this jump in price, bitcoin is still down about %70 from its all-time high near $65,000 set in 2021
Despite this jump in price, bitcoin is still down about 70% from its all-time high near $65,000 set in 2021. Bitcoin’s price has fallen sharply since then, losing more than half its value as investors worry about increased regulation and competition from other cryptocurrencies. While the price of bitcoin may rise or fall, one thing remains certain: Cryptocurrencies are here to stay.