2023 has been beneficial for bitcoin investors. Because these investors have reportedly earned higher monthly returns beyond traditional stocks.
Until now, the stumbling cryptocurrency market sees this news as outstanding. 2022 had been nothing better than a terrible year for digital assets, particularly Bitcoin. The leading cryptocurrency – Bitcoin, collapsed more than 64% over one year. It won’t be wrong to conclude 2022 as a year of blows. It marked the downfall of cryptocurrency giant FTX. Along with Bitcoin and FTX, this year also brought a standstill to the funds of Sam Bankman-Fried, the defamed/fraudster founder of FTX. If you want to invest in bitcoins then you can visit online trading platforms like thequantumai.app
But now, the first two months of 2023 bring forth things in favor of the cryptocurrency market and digital assets. On January 1st, Bitcoin traded at about $16,500, extensively below $17,000. This down was reported due to the dramatic breakdown of FTX in mid-November. But on January 30th, the leading digital currency – Bitcoin, traded at about $23,500. This was a significant gain of more than 42%. The flagship cryptocurrency, Ethereum, also traded at nearly 39% during that same period.
Bitcoin Starts 2023 with Rapid Rise:
Bitcoin dominated the crypto market by rising above $24,000 on February 2nd. Earlier, Bitcoin had this high value only in August 2022.
John Berlau, the American economist and rector of finance policy at the Competitive Enterprise Institute, was conversing with the Washington Examiner where he remarked how BTC continues to be on the level surpassing FTX bankruptcy for both bitcoin and Ethereum.
Bitcoin and Ethereum are not exceptions, either. With the cryptocurrency market getting over-advanced in the years, many more considerable digital assets have reclined with one another. As a result, the market has been returning more like traditional assets. Bitcoin’s surge over the first month of 2023 also marks the rise of other coins.
For example, Ripple is up 20% from the 1st day of January 2023. Cardano has been around with a whopping 64% increase. Also, Solana has seen a surge of nearly 150%. Even the meme coin, i.e., dogecoin, increased its value growth by almost 30%.
Inflation To be Blamed for Bitcoin Collapse in 2022:
Bitcoin and other cryptocurrencies had to taste loss last year. Several factors have fueled the loss. The fresh news about the overall macro economy is the primary reason for the crypto downfall. Macro-economy means the market pullback and inflation.
That one may crush inflation. The Fed increased rates throughout 2022. This forced the investors in several asset classes to withdraw assets and make less risky bets. But 2023, until now, has been optimistic for the central bank.
2023’s Inflation Reports Appear Better than Expected:
As per the Bureau of Economic Analysis reports, inflation rates fell to 5% for December. This report was presented after measuring inflation by the personal consumption expenditures price index. At the year’s end, the inflation rate was down from a high of 7% in June.
Inflation remains considerably more prominent than the Fed’s 2% target. But other reports put in the verification that prices are trending down. These reports hinted that the recent statement is not a lapse but a cue that underlying price pressures are decreasing.
One of the leading measures of inflation, the Personal consumption expenditures price index (PCE), was just 0.1% in November and December. This inflation index holds an annual rate well below the Fed’s target.
Another report by the consumer price index exposes that overall inflation has sunk from above 9% in June to 6.5% in December. Likewise, the producer price index indicated corresponding declines.
Eying all of these inflation reports, one can conclude that the Fed’s confidence is already slowing. In the 1st week of February, the world’s most powerful financial institution slowed its tightening.
Central Bank’s monetary policy committee in Washington had a two-day meeting. After this meeting, the bank states ‘hiking’ its interest rate target by just a quarter of a percentage point. This expansion of interest rates followed only after Fed performed a half-point hike in December and huge 0.75-point increases before that.
Higher Interest Rates & Crypto Traders:
The higher interest rates alarmed the markets. But, this movement on behalf of the Central Bank was a refreshing chance for cryptocurrency traders. The traders would otherwise have been assured of the Fed taking the first step under control and investing more money into the risky asset class.
The S&P 500’s increase in the years beginning has been seemingly proper than cryptocurrency. But, as of February 3rd, the price knocked in at nearly 10%. The financial industry regulatory authority, the Nasdaq composite, has been more volatile, shooting up 17% in 2023.
Wall Street Chief Economist and Managing Director Chris Rupkey said, “Never but now, we can remark Federal Reserve’s rate hikes are close to the end rather than the beginning. The peak rate is ‘just scarcely’ half of the percentage point. This means either the meeting or two away.” He concluded this scenario as the ‘worst-case scenario.’ He also advised, “Buy bonds and buy stocks.”