*Disclaimer: This article is not intended to be investment advice, and readers are advised to do their own research.
Bitcoin has recovered 74% from last year’s crypto crash in 2023. However, due to rising inflation and concerns about the Federal Reserve’s interest-rate cuts, digital asset faces some challenges. Despite these uncertainties, some analysts remain bullish on Bitcoin’s prospects, owing to the upcoming Bitcoin halving event in April 2024.
Bitcoin Struggles
Bitcoin fell 1% to $28,860 at 10:42 a.m. (GMT +8) on Thursday. Its recent rally has encountered some difficulties, with the token currently trading at around $27,000. However, there are signs that it may break through that level again, en route to a 7% short-term gain. The recent decline in Bitcoin’s value is unlikely to last for very long, as recent support and derivatives positioning suggests a bias toward accumulation. The drop in Bitcoin can be attributed to the release of UK consumer-price data on Wednesday, which showed that inflation remained above 10% in March. This adds to recent indications that central banks will have to continue raising borrowing costs.
Analyst Sentiments
Analysts have different views on Bitcoin as an investment vehicle in the coming months.
Positives
Some analysts remain bullish on Bitcoin’s future. Noelle Acheson, the author of the “Crypto Is Macro Now” newsletter, believes that the recent drop in Bitcoin is unlikely to last. She blames it on a “build-up in leverage that could have triggered a liquidation.”
The United States’ economic indicators this month have also cast doubt on the idea that a regional bank crisis will force the Federal Reserve to abandon tightening. In the United States, wage growth is outpacing inflation.
Furthermore, recent interest-rate jitters are unlikely to derail this year’s crypto rally, according to Fadi Aboualfa, head of research at digital-asset custodian Copper. He also mentioned that a positive funding rate, in which long investors pay a small fee to short traders, indicates a general bullish sentiment. According to an email, hedge funds are continuing to allocate Bitcoin after being on the sidelines.
Uncertainties
The future of Bitcoin is still unclear to some analysts. Riskier assets, such as Bitcoin, could face pressure as the arguments against the possibility of a recession become more persuasive, according to Fiona Cincotta, senior financial markets analyst at City Index.
Another potential cause of the rise in Bitcoin prices, which might not be sustainable, is the demise of SVB, a German financial services organization. Matt Maley, chief market strategist at Miller Tabak + Co., is unsure whether Bitcoin’s rise to $30,000 was caused by the Fed injecting liquidity following the failure of SVB or if it marks the beginning of a new bull run.
All Hopes Are Not Lost – Bitcoin Halving
Bitcoin halving, which reduces by half the number of tokens awarded to Bitcoin miners as a reward for their efforts, is scheduled for April 2024. It is a step toward limiting the supply of Bitcoin to 21 million tokens. After the last three halves, the coin has reached records each time. Bloomberg Intelligence analyst Jamie Douglas Coutts predicts that Bitcoin will reach $50,000 by April 2024. Based on previous cycles, the upcoming halving is currently priced in at about 50%. According to estimates from Bloomberg Intelligence and Matrixport, halving could result in a gain of at least 81%.
Conclusion
Because of the high rates of inflation and the waning odds of Federal Reserve interest rate reductions, Bitcoin’s future as an investment vehicle is uncertain. The allocation of hedge funds, monetary easing, and the impending halving in April 2024 are some of the catalysts that could help it surpass the $30,000 threshold despite the current difficulties. This investment might be one that merits close monitoring. However, this article is not intended to be investment advice, and readers are advised to do their own research.