With reassurance from the Federal Reserve about combating high inflation and the central bank likely to reduce its balance sheet later this year, the market has breathed a sigh of relief. Like the stock market, the crypto sector is also set for recovery.
After a roller-coaster week, Bitcoin is up 1.14% in the last 24-hours and sticking to $42,679. Ethereum is also up by 3.69% but still shy of the $4,000 mark. ETH is priced at $3,229. Some investors consider BTC as a hedge against inflation, and some view it as a risk asset like stocks. It should be noted that stocks become volatile during high inflationary periods. The same has been seen with the popular cryptocurrency.
Experts say value stocks perform better in such periods, while growth stocks perform better during low inflation. But it can be quite confusing for investors. Inflation impacts the economy and stock prices but at varied rates. As such, it is up to individual investors to make wise decisions to maneuver through these periods.
Jerome Powell, the Federal Reserve chair, said they are prepared to raise interest rates over time if inflation continues to persist at high levels. Analysts believe a low-interest environment could continue for some time. But they are not connecting Powell’s statements to bitcoin’s price movements. Powell said it is about time the world moved away from the emergency pandemic settings toward a more normal level. He observed that the road to recovery was long.
But analysts are not so optimistic. In fact, they are not at all excited by BTC’s slight recovery toward the $43,000 mark. They are pessimistic about its short-term prospects. Analysts are also warning of a potential death cross. Bitcoin Archive said it had previously happened in June. The price had plunged 20% more over 31 days. If this happens now, bitcoin would fall to $34,000 by Feb 9.