Bitcoin is the largest cryptocurrency in the world by market capitalization, the blueprint on which all of the altcoins were created. Earning the designation of digital gold due to its ability to preserve value and act as a hedge in the face of inflationary pressures, Bitcoin went through a tough time in 2022, when the prices decreased by well over 60%. January 2023 was supposed to usher in a new era and return the values to their previous glory.
However, this didn’t last long, as inflationary pressures and macroeconomic factors began to weigh against the development of the crypto market. But are values bound to climb soon, or is the BTC price still in jeopardy?
Golden Cross
The Dollar Strength Index has achieved the highest level over the past ten months, showing that the general public is increasingly confident in the strength and potential of the United States dollar. Other currencies, including the Japanese yen, Swiss franc or British pound, are going in the opposite direction. Investors have begun to be concerned that good news for fiat currency means that Bitcoin will continue to fall further.
Generally speaking, when markets experience trouble and traditional money loses value, the general public starts looking for alternatives and integrate the use of the best crypto trading bot in their operations to boost their chances to make a profit. Naturally, when the reverse happens, cryptocurrencies suffer as well. However, other analysts have said that the two are not always invariably connected and that there’s no cause for concern yet. The DXY also confirmed an incoming golden cross pattern, with the 50-day moving average surpassing the 200-day values. The signal is often regarded as a forerunner to bull markets in the views of technical analysts.
Inflation and recession
The Bitcoin environment is highly sensitive to both internal and external pressures, and it’s usually a combination of factors that impact the price points. While scarcity is also crucial to creating and fostering value, the latest news and movements within financial markets have a role to play as well. Although concerns about inflation remain relevant, economic growth continues in the United States, and the dollar is regaining its strength.
The market expectations for gross domestic growth in 2024 are hovering somewhere in the 1.3% area. This is considerably lower than the 2.4% rate of the previous years. The slowdown has been blamed on tighter monetary policies, interest rate hikes and lowered financial stimulus figures. If investors choose to hold on to cash, it will indicate a recession and a surge in inflation.
So far, the available data shows that investors have been avoiding government bonds in favor of cash positions and have been using an automated crypto trading bot to improve their performance. That can appear counterintuitive but actually aligns with the strategy of waiting for a better entry point. Although the Federal Reserve didn’t elevate interest rates in September, another hike is expected by the end of the year. When that happens, investors will have the chance to get higher yields.
Bitcoin and money
The US government continues to raise the debt ceiling, meaning that investors are facing the possibility of dilution. That would render the nominal returns less significant because of the increase in money supply. It explains why Bitcoin, an asset that uses scarcity as an integral part of its pricing fluctuations, would perform well even during periods of economic slowdown when business tends to stagnate.
It also depends on whether the Standard and Poor’s 500 remain on a downtrend. If that’s the case, the investors could exit riskier markets even if there’s evident growth potential. If the environment shifts to these characteristics instead, then Bitcoin would indeed suffer the repercussions. In fact, the bleaker scenarios claim that BTC could even record negative performance as a result. The increased liquidity typically works in Bitcoin’s favor as investors look to alternative assets to offset the risks of stagflation, the combination of a motionless economy and rampant inflation.
Ordinals alternative protocol
Bitcoin Ordinals have been all the rage lately, as many investors shifted from the previously popular NFTs to something newer that promises to create more value. Recently, the tokens’ inventor Casey Rodarmor has found an alternative for BRC-20, which would allegedly not leave so much refuse on the Bitcoin network compared to the current Ordinals. The BRC-20 was launched in March and skyrocketed to $1 billion within just two months.
BRC-20 allows both the transfer and the minting of the tokens through the use of the Ordinals protocol. There’s only one issue with them: they create too much junk from unspent transaction output. The newer alternatives would remedy this situation, reducing UTXO proliferation. Using smaller on-chain footprints and better management practices would result in drastic harm reduction for the protocols.
Although Rodarmor admitted that there’s a scamming problem in the environment, he also says that the correct protocol will be able to add considerable value to the BTC network through developer mindshare and transaction fee revenue. The new protocol, known as Runes, was revealed in the last week of September.
Price outlook
So, what can investors expect from cryptocurrency price evolution over the near future? The first and most important thing to know is that values remain wobbly even at the $26,000 support level. Going into the last week of September, bulls couldn’t regain lost ground due to sideways trading during the weekend.
Bitcoin didn’t manage to break through the local resistance as a result of a descending trend line, as the outlook remains bearish. If that’s true, then Bitcoin could risk falling as low as $22k. Some investors have already started expecting a return to the $20,000 level, a price that hasn’t been seen in six months. The movement could be part of a double-top breakdown. Now, it’s time to keep the current support levels constant.
The bottom line
Although Bitcoin has been struggling over the past months, investors remain dedicated to adding it to their portfolios. The price points haven’t affected its popularity, and many are still convinced of its potential. In fact, some investors have seen the lower prices as an opportunity to begin new investments, as now is the best time to do so without worrying about the prices.
Moreover, it means that once the prices start climbing again, you’ll get more profit.
Image: Unsplash
