Even though Bitcoin has been trading in a narrow band lately, that doesn’t detract from its impressive 84% rise in 2023. This big rise in Bitcoin’s price has also made people want to buy other cryptocurrencies, which has caused their prices to rise greatly from their yearly lows. After going over $31,000 on June 23, Bitcoin has been stable at $30,000 for the past week. It stays close to the strong support level of $31,000, which means BTC might be consolidating just above $30,000 levels and getting ready for a massive bull run.
Why is BTC consolidating above $30,000?
There are a few reasons why BTC is consolidating above $30,000.
- Macroeconomic factors: Rising inflation, interest rate hikes, the Russia-Ukraine war, global oil price hikes, and oil-related crises all weigh on the global economy. As a byproduct of these economic challenges, assets like Bitcoin weigh down despite not being under regulatory control. This is due to the overall sentiment in the market and the crunched money circulation. However, now Bitcoin is considered a hedge against inflation, just like gold in terms of a store of value. Read below to find out how to choose an asset to hedge against inflation.
- Technical factors: Understanding the asset class is highly imperative. We all know that Bitcoin is a cyclical asset, meaning its price movement is directly related to economic health. BTC is now consolidating after a massive price hike in 2021, a health indicator of the global economy and mostly a positive intermission before the next anticipated bull run.
- Positive developments: HSBC crypto adoption, Bitcoin ETF, Bank of England being open to digital currencies, India launching its digital currency, taxation, etc., are all positive trends towards cryptocurrency adoption. All mentioned have been factored into the economy and helped boost investor confidence in the asset class.
Hence, these are reasons enough for BTC to consolidate above $30,000.
How do you know an asset is a hedge against inflation?
The answer is simple when the asset price increases faster than the inflation rate! There are a few factors to consider when determining whether an asset is an inflation hedge:
- The intrinsic value of the asset: An asset with inherent value, meaning principal value, such as gold, real estate, or Bitcoin, is more likely to hold up during inflation than an asset with just store value, like cash.
- Asset Demand: An asset in high demand is more likely to appreciate value during inflation, as people will be willing to pay more to preserve their purchasing power. Remember how demonetization stirred up the price of gold in India overnight? Yes, exactly that!
- Asset Supply: An asset with a limited supply is more likely to appreciate during inflation, as people will compete for a limited number of assets. We know that BTC has a limited supply, so the math is up to you now!
No asset is a perfect hedge against inflation. However, investing in an asset or security that rises faster than the inflation rate can help protect your wealth in testing economic times.
What factors can affect the price of BTC in the near future?
Here are some factors apart from the ones mentioned above that can impact the price of BTC in the near future:
The 2024 US Presidential elections: Undoubtedly, the USA is the economic powerhouse of the global economy. Will the 2024 elections in the US impact the price of BTC? The answer is no! But it will be unfair to say that the investors will not sit in speculation of the move and the regulatory changes that may be implemented with the change in government power etc.
The consolidation of BTC above $30,000 can be seen as a sign that investors are waiting to see regulatory changes. No one can predict the longevity of the support levels; it can be a week, a month, or a year. But the future of Bitcoin looks promising as of now.
The direction of the global economy: If it continues to grow, it could lead to more demand for Bitcoin as a store of value. The consolidation of BTC above $30,000 is a sign that investors are waiting to see the direction of the global economy before making any major moves. If the global economy continues to grow, it could lead to a rally in Bitcoin as investors become more confident in the future of the cryptocurrency.
The continued development of the cryptocurrency industry: If it continues to grow and mature, it could lead to more institutional adoption of Bitcoin. This could drive prices higher.
Overall, the price of BTC is likely to be influenced by a combination of these factors. It is important to monitor these factors closely to gauge the next price move.
Should I Invest in Bitcoin now?
Bitcoin, or any other cryptocurrency, is highly volatile and speculative. It is important to remember that no one can predict the exact time and date for the bull run, but if you haven’t already jumped into the market when it was low, now may be the time. Once the market enters a massive bull chase, it will be practically impossible to build positions in the market. As per analytics, the time for Downward averaging is over; you may consider upward averaging while BTC is at its support level to book great profits in the future. However, monitoring the broader market conditions and technical indicators to gauge the next price move is important. Do not consider this as investment advice. Kindly DYOR and then head to LotusX when convinced!
