According to Bloomberg Intelligence, Bitcoin’s gain in the last two weeks has ranked it one of the best-performing assets of the year.
Mike McGlone, the firm’s senior macro analyst, compares the rebound to a previous comeback in early 2019 – but in a tightening liquidity situation.
In a LinkedIn post on Wednesday, the analyst stated that Bitcoin’s surge from the beginning of the year until January 17 might indicate either a bottom or a “bouncing bear.” Bloomberg’s bias, he claims, is both, but with a critical difference in light of 2019’s early-year recovery.
“This time, the Federal Reserve is tightening,” he remarked. The $5,000 pivot four years ago vs. $20,000 now could foreshadow Bitcoin’s extended trajectory.
Bitcoin has gradually shifted in four-year cycles, with frantic bull runs one year followed by dramatic declines the following – with less active, more modest increases in the intervening years.
Bitcoin fell from a high of nearly $19,000 in late 2017 to a low of under $3200 in December 2018, before recovering over $5,000 by April 2019.
Bitcoin peaked at $69,000 in November 2021 before retracing to under $16,000 in November 2022 in its most recent cycle.
Currently, Bitcoin has already surpassed its 2017 highs, forcing observers to question whether history is reliving itself over four years later.
From early 2022 to the present, the Federal Reserve has hurriedly raised interest rates in order to counteract the United States’ record-high CPI inflation.
The following worldwide liquidity shortage has definitely brought down prices, but it has also decimated the crypto business, forcing industry stalwarts like Coinbase and CryptoCom to scale back significantly.
Contracting prices, in particular, have prompted a downward trajectory of bankruptcies and involuntary liquidations, ranging from lending firms to mining corporations to exchanges like FTX.
For instance, the Federal Reserve was lowering interest rates in 2019 when Bitcoin reached a high of $5000. “Another 60 basis point boost is predicted into June,” said McGlone.
Bitcoin’s surge this month has been fueled in large part by a positive December CPI report, which showed yearly inflation at 6.5%, down from 7.1% the previous month.
Such indicators suggest to crypto and stock investors that the Fed may soon be able to resume a more dovish monetary policy.
Some analysts, however, are skeptical. Last week, David Kelly, JP Morgan Chase’s Asset Management Chief Global Strategist, forecasted that the Fed will keep raising rates until May, after which it will keep its base rate over 5% until the end of the year.
“The concern is whether the economy will be robust enough to enable them to keep interest rates at that reasonably high level.” Kelly inquired at the moment.
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