Bitcoin price has bounced up somewhat after many days of catastrophic decline, but the uptrend did not last long.
"Bitcoin's rally started last week, but so far, the price of Bitcoin has not been able to return to the $40,000 mark. This may disappoint some investors," said financial expert Craig Erlam. (based in London) replied to Zing.


Haven't returned to the $40,000 mark yet

According to Mr. Erlam, investors' risk appetite is improving. "This naturally supports Bitcoin's price momentum. As a result, Bitcoin could return to the $40,000 price threshold, as long as the uptrend holds," the expert forecast.

"But some investors are taking profits. This led to a 4% drop today," Mr. Erlam explained.

Bitcoin's market capitalization shrank to $708 billion. Compared to the peak of $68,789 set on November 10, 2021, the Bitcoin price has plummeted 45.62%.

The total market capitalization of cryptocurrencies also plunged 2.88% to $1,730 billion. Ether - the world's second largest cryptocurrency - saw a price drop of nearly 4% to $2,676 per coin. However, compared to a week earlier, the coin is still up 2.54%.

The sharp decline in Bitcoin price began on January 21, after the price plummeted from an intraday high of 43,300 USD to more than 38,000 USD, causing the market capitalization to lose the 800 billion mark in turn. USD, 700 billion USD.

On January 24, the price at one point fell to 33,500 USD, marking the lowest level in 6 months.

The price of Bitcoin fell sharply in line with the momentum of other risky assets such as technology stocks. The reason is that investors are concerned about the possibility that the US Federal Reserve (FED) will strongly raise interest rates to control inflation.

According to Edward Moya, a financial expert at consulting firm Oanda (based in the US), investors are concerned that the FED may sharply tighten monetary and fiscal policies this year.

"The Fed made a mistake on inflation. Its haste to raise interest rates to prevent prices from soaring could put a lot of pressure on risk assets. Those asset classes saw strong gains in the last quarter of the year. pandemic period," explained Mr. Moya.

Depends on the decision of the Fed

Some advocates argue that Bitcoin is a form of "digital gold" that benefits when the economy and markets fluctuate. But over the past months, Bitcoin has acted as a risk asset.

"Bitcoin will continue to be traded as a risk asset. The currency could benefit as central banks are reluctant to tighten monetary policy," commented Mr. Moya at Oanda.

According to the expert, at the moment, interest rate decisions from the Bank of England (BoE) and the European Central Bank (ECB) can affect Wall Street more than usual. Because investors are looking for signs of risk appetite.

Meanwhile, Fed officials also want to raise interest rates without causing too much damage to the economy.

Observers believe that the Fed will come up with a slow and methodical plan to deal with the escalating price situation. Aggressively raising interest rates could hurt the economy and rattle financial markets.

According to fund manager Bill Ackman, if the Fed raises interest rates by 0.5 percentage points, the agency will "create shock and horror for the market".

Most Wall Street bankers think that the Fed will find ways to reduce inflation pressure with small interest rate hikes. Goldman Sachs forecasts that the Fed may raise interest rates four times this year (March, June, September and December) and begin to reduce the size of its balance sheet since July.

Mr. Jamie Dimon - CEO of JPMorgan Chase - forecast that the US central bank will raise interest rates "more than 4 times this year", even up to 6, 7 times. The fact that the Fed does not raise interest rates suddenly could help risk assets, including technology stocks and cryptocurrencies, recover.

“If the Bitcoin price breaks through the $40,000 threshold, some investors may buy in, thereby boosting Bitcoin’s further momentum,” commented financial expert Moya.

"But it seems that it is still too early for the Bitcoin price to reach $40,000. In the next week, the price may fluctuate in the range of $30,000-40,000," he forecast.

According to the expert, Bitcoin price will continue to be affected by fluctuations in the stock market. The next week's inflation report could also hit the crypto market hard.
Axact

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