Bitcoin has been going through a rough time in 2023, in spite of the original predictions that the current year will allow the digital coin to move away from its slump. Although the Bitcoin price today has succeeded in climbing above the $26,000 mark, digital gold is still dealing with the aftershocks of August 17th, when prices lost a considerable portion of the gains they had accumulated throughout the summertime.
Bitcoin is known for its fluctuating values despite being far more reliable than altcoins. For this reason, it’s impossible to predict price changes and developments, mainly since there are so many factors that influence BTC’s movements. However, there are some indications of where the original digital currency will go in the near future.
Economic situation
Price turbulence remains suppressed in the Bitcoin environment, a movement consistent with the current situation within the stocks and bonds market. Many crypto traders believe that the most recent Federal Reserve decision will impact the progress of the digital finance market as well. The Fed didn’t hike interest rates again but indicated that there’s a very real possibility that there will be another one by the end of the year.
The gross domestic product is expected to increase by 2.1% this year, more than double compared to the previous June estimate. The outlook for the 2024 GDP has also switched from 1.5% to 1.1%. The figures show that lawmakers don’t believe that the threat of recession is imminent. Inflation was down by 0.2 percentage points compared to June, moving below 4%. The unemployment outlook has also improved, moving from 4.1% to 3.8%.
The Federal Reserve has also continued to reduce its bond holdings, cutting the central bank balance sheet by a whopping $815 billion since June 2022. It allows over $90 billion in proceeds to roll off on a monthly basis instead of reinvesting. Many investors believe these announcements will affect Bitcoin, but the price won’t move by more until the end of the week.
US dollar surge
On September 22nd, Bitcoin recorded a slide to $26.4 due to a surge in the US dollar. The 10-year Treasury rate moved to a 16-year high. The equity markets continuing to sell off might cause further disturbance and get Bitcoin to an even lower level. The Bitcoin slump saw the values drop by almost 2% in 24 hours. Even the positive news regarding the defunct exchange Mt. Gox, which delayed bankruptcy creditor payouts, was insufficient to steer the marketplace in a different direction.
The altcoins were impacted as well. Ethereum fell to a new 14-month low against Bitcoin and was down 1.8% during the day. Other coins fell between 3% and 5%, recording even more considerable losses. The DXY index, the figure measuring the dollar’s strength compared to several other currencies, skyrocketed to 106, the highest level since March. As a result, equity markets began to sell off.
The equity and rates market has navigated some of the critical levels to reach this point. The macroeconomic structure could potentially transfer to the crypto environment as well and take Bitcoin even lower. The higher rates will also pressure digital asset firms, adding to their ongoing list of concerns. Refinancing will be thorny while borrowing costs will remain elevated.
Bull run
In January 2023, many traders and analysts were convinced that a bull run was imminent. And while it did start, it also fizzled out relatively quickly, following a rather challenging time. It took considerable effort to maintain pricing within a definitive range, and in August, much of those gains melted away. Now, the experts are divided on when the next bullish run can be expected, but most agree that the bull run won’t be like the one that preceded it.
The presence of a Bitcoin rally won’t necessarily mean that the entire cryptocurrency environment will benefit as well. Therefore, altcoins are unlikely to climb as well. However, although the prices of cryptocurrencies have been challenged over the past eighteen months, there’s been growing interest in blockchain technology coming from corporations. For this reason, the rally will likely come from the introduction of blockchain systems, as well as the use of crypto assets to execute tasks within the system.
Short-term holders
Bitcoin speculators have been dealing with considerable issues recently, as their holdings were the center of a crisis, including unrealized losses. For this reason, many investors have decided to move to hodling since that strategy has yielded more satisfactory results. Now, short-term holders are dealing with considerable panic since almost all of them deal with losses of close to 100%.
The price action Bitcoin displayed over the past few months has been challenging for investors and has tested the resilience and determination of many. As of September 17th, the cost basis for the individuals not spending their BTC is $28,000, 5% higher than the spot price. As part of the research into this question, the STH group was separated into spenders and holders. The results were that there was a “non-trivial change in sentiment.”
The cost basis for those who are spending got under the one for the holders as the marketplace sold off. This clearly indicates that negative sentiments have been gaining ground. There’s also an overall sense of caution among investors, especially as many analysts confirm that lower levels are likely to appear along the way.
Cyprus exchanges
Recently, a multi-asset investment company expanded its services worldwide by securing regulatory approvals in Europe. On September 21st, the company announced that it received official registration from Cyprus, meaning that it will be authorized to offer cryptocurrency transactions across the European Union from a single entity.
All the services are fully regulated, and the legislation is expected to come into effect in December 2024, alongside the EU Markets in Crypto-Assets Regulation. Several other crypto firms have been expanding recently, particularly in Europe, saying that the region is crucial because of the large number of investors.
Although the cryptocurrency market has recovered compared to 2022, it is still not back to its full strength. Until it goes back to how it was in the past, investors must be patient and take care of their portfolios.
