By
Steve Muchoki
April 19th, 2024
Despite the fact that Bitcoin price is currently trading in the lower 30Ks, analysts say the metrics suggest that there might be a silver lining.
The price of Bitcoin (BTC) is at its lowest in six months after macro concerns impacted the digital currency market. The leading crypto was changing hands at around $33K as of Monday, which is about 50% off from its record high in November.
This bearish run was quite pronounced last week and affected most crypto assets across the board. For instance, Ethereum (ETH), the second-largest digital currency by market cap, suffered a 30% drawdown. Furthermore, other cryptos were trading down by 40% or higher for the same period.
However, according to a recent analysis, the bear phase may be over for Bitcoin sooner rather than later. This is because the prominent token recently reentered a key price zone. In addition, Charles Edwards, the founder of crypto investment firm Capriole also corroborated this in a tweet on January 24th. According to him, BTC’s network to value (NVT) ratio metrics was in a fresh “oversold” territory. The official tweet read:
“Hello NVT old friend. Valuing the #Bitcoin network based on transaction value throughput suggests we have entered the value zone.”
As a result of this development, on-chain analysts believe that the recent losses suffered so far are due to market overreaction. This is as opposed to any probability of a sustained price slump run.
Su Zhu, a prominent crypto bull and investor commented on the situation. He stated that he underestimated just how much the macro contagion would adversely impact the prices of digital currencies. Nonetheless, Zhu also expressed optimism about the future state of prices. In his own words:
“I was undeniably wrong about how much crypto could fall from macro contagion, I remain bullish on the space as a whole and think it is the most important mega-trend of our times.”
Bitcoin Price Slump Comes amid Fed’s Plans to Hike Interest Rates
The recent decline in digital currencies – and by extension, crypto company shares coincides with the broader tech stock market. A major influencing factor for this is the plan by the US Federal Reserve to hike interest rates and reduce its balance sheet. As a result, investors are avoiding generally-perceived riskier investments, such as tech-inclined securities, for safe havens. A typical example of the latter is the stocks of regional banks, which have the potential to perform well despite a more stringent Fed policy.
The Fed plans to meet at least twice this week to begin deliberations on the planned interest rate hike and market stakeholders will be watching. Some analysts and economists are already projecting that the US central bank will likely increase interest rates multiple times this year.
Others believe in the interim that only a significant drawdown in the price of crypto could influence the Fed’s decision to hike rates. As Joshua Lim, head of derivatives at Genesis, put it:
“The Fed is not going to curtail its aggressively hawkish stance without seeing much more downside in asset prices. We will possibly see a relief rally going into the FOMC on Wed.”
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