Source: PaxForex Premium Analytics Portal, Fundamental Insight
Bitcoin has had a low growth rate this year. Uncertain economic and geopolitical conditions have caused the price of the leading cryptocurrency to drop 50% from its November highs. But the situation could change.
Bitcoin just passed the $47,000 mark, its highest since the beginning of the year. According to CoinGecko, it has risen more than 25 percent in the past two weeks. Other leading cryptocurrencies, such as Ethereum (ETH), are showing similar growth. Ethereum has gained more than 30% in the last two weeks. So what caused this price increase and can the rally continue?
Several factors may be contributing to the rise in bitcoin's price. These include the following:
- Bitcoin buying by Terra
In March, Terra (LUNA) announced its intention to buy $10 billion worth of bitcoins as part of a plan to build a reserve fund for its UST Stablecoin. The company plans to start by buying $3 billion worth of bitcoin in the short term and gradually add the remaining $7 billion over the long term. The fund behind Terra is reportedly buying batches of $125 million at a time. This has contributed greatly to the price increase.
- Market sentiment turns positive
The sentiment is often an important factor in rising cryptocurrency prices. One of the consequences of cryptocurrencies being a relatively new and unregulated industry is that it can be difficult to get accurate and reliable information. This means that investor confidence and sentiment can have a greater impact on price than, for example, in the stock markets.
- Russia, cryptocurrency, and sanctions
It is still unclear to what extent Russia will be able to use cryptocurrency to avoid sanctions. But the fact that the country is considering accepting cryptocurrency payments for oil and gas suggests that crypto investors cannot ignore the issue. Russia's invasion of Ukraine has triggered tough sanctions from various countries, and some people, including Senator Elizabeth Warren, worry that Russian oligarchs may use digital currencies to hide some of their wealth. The sanctions extend to cryptocurrencies as well. But it seems ordinary Russians have turned to cryptocurrencies to protect themselves from the falling rubble. We don't yet know if the country's billionaires have been able to do the same.
- Progress in the adoption of cryptocurrencies
In the past year, cryptocurrency has taken some steps toward the mainstream. These include a rise in institutional acceptance and an increase in the number of retail investors. According to Pew Research, 16 percent of Americans now trade or use cryptocurrency in some form. Most recently, Goldman Sachs became the first major U.S. bank to trade cryptocurrency on an exchange, marking another milestone in the acceptance of cryptocurrencies.
As we know, nothing is certain. Some analysts believe that in the long term, the price of bitcoin will rise, while others continue to argue that the market will collapse. Optimists include predictions that bitcoin could reach the $100,000 mark by the end of this year, as well as those who argue that it could be worth $1 million by 2030. In fact, the price of bitcoin is very difficult to predict because there are so many variables and so few reliable bases. The key is to invest only money you can afford to lose and to make sure bitcoin is part of a balanced portfolio. This way, you won't face financial ruin if the cryptocurrency market collapses, but you can still benefit from any price increases.
Cryptocurrency is a volatile asset, but so far it has always eventually recovered and surpassed its highs. The fact that bitcoin has risen and made up for this year's losses is a positive sign. But if you are a long-term investor, these relatively short-term price fluctuations are unlikely to have much impact on your investment performance. If you look at your investments through the lens of the long term, even significant price declines will be easier to keep on your radar.
As for whether the price of bitcoin could go higher in the short term, investors are advised to be cautious. Bitcoin may continue to rise in the coming weeks, but it may not. There is a lot of uncertainty, and it is too early to judge whether this will be a temporary bounce or the beginning of a sustained rise.
For example, we are likely to see increased regulation of cryptocurrencies in the UK and Europe. Also, the U.S. Federal Reserve continues to take steps to curb inflation, and there are warnings of a possible recession. In addition, we do not know how the crisis in Russia will develop, and how it may affect the cryptocurrency market. The recent price spike is encouraging for investors, but it is too early to start counting chickens.
As long as the price is above the 38000.00 level, follow the recommendations below:
Time frame: D1
- Recommendation: long position
- Entry point: 47317.00
- Take Profit 1: 52000.00
- Take profit 2: 55000.00
Alternative scenario:
If the level of 38000.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 38000.00
- Take Profit 1: 33000.00
- Take Profit 2: 29000.00