Keep This In Mind: On Why Bitcoin Picked Up Lately
In the past week, crypto news shows that Bitcoin, the most established asset and safe store of value in our digital age, increased in price for several reasons. The rise brought about a positive change in overall sentiment across the crypto industry considering the upheaval it has seen of late with many asking: ‘why is crypto down?’ or ‘will crypto recover?’ Several crypto news platforms show that token prices have risen and trade volumes have climbed. The crypto community seems to have ‘come alive’ again, too, after crossing a few hurdles. Here are some of the observed factors that contributed to the developing trend.
Confidence back after the FTX saga
A top factor is the restoration of investor confidence in crypto after the collapse of FTX exchange, even though it wasn’t the starting point of the downward trend. Other events that contributed to the setback include the TerraUSD issue, 3AC, and the Celsius solvency. However, despite the precursors, the FTX issue was the most impactful considering its position as the second-largest crypto exchange out there (at the time). It generated a lot of attention both from the mainstream media and independent crypto news platforms. FTX had many crypto-related businesses depending on it to run their operations. Its trouble dealt a big blow to the industry, but its effect is now wading as the entire space gets back on course.
Institutional investors’ long-term confidence outlook
Another factor at play is the impact of interest rates which is the most interesting element for institutional investors. Since interest rates were not hiked to curb inflation as earlier expected (inflation did not reach the anticipated peaks), institutional investors regained confidence and increased their investments in crypto assets and tech stocks. Recent inflation data showed that the consumer price index decreased by 0.1% in December to suggest that the Fed may ease off of increased interest rates in the coming months to boost confidence and interest in Bitcoin.
Bear market empowered ‘hodlers’
Before the FTX issue, there was a sparse opportunity for almost everyone in the cryptoverse to stock up on their favorite digital asset. A prolonged state of the bear market caused the value of assets, including Bitcoin, to drop thus affording ‘diamond hands’ the rare opportunity to fill and hold on to their bags. Now, holders of assets deemed promising according to their fundamentals, and use case(s) continue to ‘hold’, and even accumulate more, rather than sell. As the bear market’s debilitating impact dwindles, and the number of crypto users increases (estimated 219 million Bitcoin users as of December 2022), the squeezing appears to have begun. With Bitcoin users, for example, projected to reach a billion in about seven years, it could be said that more crypto users are likely to ‘hodl’ longer thus adding to their value.