Market Analysis: Why Is Crypto Going Up?

In recent years, cryptocurrencies have become an increasingly popular investment option for those looking to diversify their portfolios and take on risky assets. With Bitcoin leading the way as the largest and most popular crypto asset, many investors are wondering why the value of digital assets is going up. 

In this article, we will explore some of the factors driving the recent surge in cryptocurrency prices and discuss what investors should consider when making financial decisions about investing in digital assets. While the crypto market can be highly volatile and subject to sudden price swings, understanding the reasons behind its current upward trajectory can help investors make informed decisions about the role of digital assets in their portfolios.

Previous Resistance

As our experience shows, most crypto assets in the market are highly correlated with Bitcoin’s price movements. As a result, analyzing the crypto market often involves a close examination of Bitcoin’s price trends. Due to its dominant market position and influence, Bitcoin price movements can significantly impact the prices of other cryptocurrencies. Therefore, crypto market analysis (including this article) primarily focuses on Bitcoin, and its trends are considered a leading indicator of the broader market’s direction.

BTC's price history may explain what's going on with Bitcoin.

If you’re wondering, “Why is Bitcoin going up?” familiarize yourself with BTC’s past performance — one may argue that it is a cyclic pattern. 

Bitcoin has had a history of volatility, which is only amplified if we are to discuss its past resistance levels. In June 2019, Bitcoin saw its then-all-time high of $14,000 and was close to breaking through the previous resistance level of $14,000 that plagued it in the past. If it were to have achieved this feat, then it sure would have marked the start of a new bullish run for this cryptocurrency.

Regretfully for Bitcoin and its supporters, it failed to break through the $14,000 obstacle point in June of 2019 and started nose-diving until reaching a trough close to $3,800. Later on, in October last year, Bitcoin retested this same high point yet once more just to return back down due to having failed again. Consequently, Bitcoin has not been able to surpass that same barrier once more since then.

Bitcoin Crash: What Was Behind the Recent Crypto Collapse?

The Bitcoin crash of 2021 was an incredible occurrence that left institutional investors, analysts, and the entire crypto community baffled. Many wondered what had caused such a sharp decline in value so quickly. The primary cause of the Bitcoin crash can be attributed both to external factors within global markets and internal issues within much of the cryptocurrency world.

Externally, speculation about the Chinese government imposing tougher regulations on digital assets, rumors of a Coinbase listing that never happened, and negative news about Tesla were all seen as culprits for Bitcoin’s fall. Along with this, there was also instability within government-backed currencies due to inflation concerns and substantial geopolitical uncertainty throughout global markets. This caused some investors to seek alternative options to protect their money from further downturns in the traditional stock market, creating an influx of demand for cryptocurrencies like Bitcoin.

Analyzing why is crypto up today: Is it the end of the crypto winter?
Overall cryptocurrency market capitalization per week from July 2010 to March 2023 (in billion U.S. dollars). Source: Statista

Internally, however, popular coins like Bitcoin were suffering from increased competition in their own blockchain technology, which threatened their dominance. Besides, technical scalability issues caused transaction fees to surge, which reduced its practicality as a payment system. Furthermore, several large-scale hacks also cast doubt on the security protocols within several crypto networks, including Bitcoin’s own decentralized ecosystem. This led to a lack of trust among potential users.

However, the crypto market has since rebounded in anticipation of the Federal Reserve’s more accommodative approach to interest rates. This change in stance has contributed to the recent surge in digital asset prices — Bitcoin has been slowly rising since the crash of Silicon Valley Bank.

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What Is Happening to the Value of Bitcoin and why?

The recent surge in the price of Bitcoin (BTC) has come as a surprise to many who have observed the cryptocurrency market in recent months. With BTC breaching the key psychological level of $30,000 for the first time since June 2022, crypto traders are beginning to see the potential that the world’s largest cryptocurrency holds. Movements in tech stocks, liquidations of short positions, and general market optimism have all been factors helping drive this tendency.

In addition to this recent surge in Bitcoin’s value due to broader market movements, Ethereum (ETH) has also seen an increase as investors become bullish on virtual currency as a whole. Ethereum, being one of the most widely-used platforms on which users can transact with digital currencies, represents another avenue through which investors can enter cryptocurrency markets. This combined strength across both markets is expected to preserve as buyers remain optimistic about their prospects over the long term.

Has Bitcoin’s Bubble Burst?

The Bitcoin bubble of 2021 was unprecedented, with the price soaring by more than 700% in just 12 months to reach a record high of $69,000 in November. This massive spike caused some investors to become concerned about a possible burst. It seemed as though their fears were justified when, shortly after its record high, uncertainty over the future of the largest crypto suddenly caused prices to crash. In June 2022, Bitcoin plummeted below the $18,000 mark, and by November, it had yet to recover back above $20,000.

Is Bitcoin going to go back up, or is it the pop of the crypto bubble?
With Bitcoin’s price fluctuations impacting the broader crypto market, investors often ask, “What’s going on with Bitcoin?” as they closely monitor news, trends, and market movements to better understand the factors influencing the cryptocurrency’s price. Image source: CoinGeek

Though Bitcoin appears to have finally found stability and is now beginning to show signs of recovery, it’s still far off from reclaiming its prior highs. The sheer size of the Bitcoin bubble has made many believers cautious and understandably reluctant to invest again. That being said, there are plenty of optimists who remain confident that Bitcoin can continue growing even further in spite of its tumultuous past. No matter which camp you fall into, anyone investing in Bitcoin should be aware that large swings come with both gains and losses potential.

Is Crypto Winter Over?

The crypto markets have been in a state of turmoil since the beginning of the year, with prices fluctuating widely as investors and traders bought and sold their positions. Over the past few days, however, prices have been on the rise across the board, leading many to declare that “crypto winter” is over and that a bull market has returned. A contributing factor to this increase appears to be the liquidation of over $150 million worth of Bitcoin short positions, which triggered an influx of buy orders, sending prices skyrocketing even further.

The sudden surge in prices is encouraging for cryptocurrency market investors as it shows that there can still be significant potential for returns even when long-term profitability appears unlikely. Nevertheless, it is important to understand that while such short-term rallies can lead to notable gains, they do not necessarily indicate that a bull market has begun or will continue indefinitely; instead, careful analysis should be used to ensure that one’s portfolio remains adequately diversified and appropriate risk management strategies are employed.

Wondering what the future holds for crypto? Read this article to find the answer!

Adoption as a Means of Payment

The adoption of cryptocurrencies, including Bitcoin, as a payment method has contributed to their appreciation in value over the years. PayPal’s recent announcement to allow users and merchants to engage in transactions involving Bitcoin and other cryptocurrencies had a significant impact on its price, resulting in an immediate increase.

The potential of such widespread adoption cannot be overstated. Now that over 20 million active merchants accept payments in Bitcoin and estimated 350 million users around the world have access to more seamless purchases, storage, and usage of digital currencies, PayPal’s announcement has opened up avenues for cryptocurrency. Such widespread adoption will drive growth not just within PayPal itself but also across other venues, which are beginning to see the benefits of using digital currency as a reliable form of payment.

Regulations and Legal Requirements

The regulation of cryptocurrencies has become a topic of discussion due to their increasing popularity. The SEC (Securities and Exchange Commission) views them as securities like stocks and bonds, whereas the CFTC (Commodity Futures Trading Commission) categorizes them as commodities like coffee or gold. The lack of agreement between these regulatory bodies has created uncertainty in the market. If a ruling clarifying spheres of cryptocurrency regulations is made, it could lead to greater trust in cryptocurrency investments and open the door for more widely traded crypto-related financial products such as ETFs or futures contracts.

Regulation of cryptocurrency exchanges is necessary in order to offer investors an easier and more secure way to trade, leading to increased value added to cryptocurrency investments. Such regulation would provide more avenues for investing in cryptocurrencies, giving investors greater peace of mind when making trades on these marketplaces. Clear regulations in place may even give institutions and banks the ability to get involved in this new asset class, further validating it as a legitimate investment option. Thus far, with little agreed-upon regulation, it remains difficult for people or institutions to invest confidently in cryptocurrencies.

Halving and the Stock-To-Flow Model

The halving, or “the halvening” as it is sometimes called, is a monetary policy tool coded into Bitcoin’s source code designed to reduce the number of new Bitcoins produced at regular intervals. This is executed by reducing the reward for miners from 12.5 BTC per block to 6.25 after every 210,000 blocks (every four years). This halves the rate at which new Bitcoins enter circulation, meaning that each successive halving decreases the flow of newly minted coins into the market and thereby increases their scarcity. In addition, this steadily reduces the inflation rate of Bitcoin over time, creating a path towards its ultimate deflationary nature due to the finite supply of 21 million coins.

The Stock-To-Flow Model further reinforces this idea by measuring how much new Bitcoins will be added to circulation compared to existing supply and predicting the effects of these factors on price movements in various markets over time. The model is based on historical trends in previous halvings and makes assumptions about how much of an impact each variable will have on future prices depending on its relation with scarcity. Thus far, it has been pretty accurate in predicting spikes in price following each block reward reduction.

Understanding the Value of a Cryptocurrency

Cryptocurrency is a unique currency type that does not rely on any central authority to dictate its value and instead utilizes factors like supply and demand, production costs, availability on crypto exchanges, and competition to determine its worth. In this way, cryptocurrency differs from fiat currency, which is typically issued by a government body and instead exists in a more open market. While government backing can increase faith in the value of a currency among citizens, cryptocurrencies are completely independent from such support.

Instead, cryptocurrency draws its value from the numerous factors outlined above. Supply and demand play a large part in dictating the price of tokens at any given moment; if there is high demand for a certain token with limited supply available then it is likely that price of those tokens will rise correspondingly. The cost to produce crypto tokens also factor into their overall valuation as the more expensive they are to create means they are inherently less desirable than other tokens generated more cheaply. Additionally, accessibility on various exchanges can help boost the general worth of cryptocurrencies as transactions made through these exchanges may help bring attention to coins with lower liquidity or recognition.

Investing in Cryptocurrency

In recent years, Bitcoin has garnered a lot of attention as an attractive asset to own. Proponents of its value point to its history of recovering from crash events. Even though there is no guarantee that it will continue to do so in the future, many investors find it compelling because the current market prices are relatively low compared to its all-time highs. Furthermore, the sentiment around the asset can indicate whether it is a good time to buy or sell. For example, when fear enters the bitcoin market, it often acts as a drop in price, and can be seen as a good buying opportunity for those looking to invest in it.

This sentiment is visible through measuring tools such as the Bitcoin Fear and Greed Index (BFGI) which tracks volatility changes in the cryptocurrency market and signals investor sentiment about the prospective prices for BTC going forward. This index has been showing signs of fear recently due to geopolitical risks such as trade wars or potential Fed rate hikes. As with any asset investing opportunity, however, individuals interested should always do their own research and make sure they understand why they are investing and if this is truly a model that makes sound financial sense for them at that particular moment in time.

Is now a good time to buy Bitcoin?

Also read: Deep Dive into BTC Investments.

The cryptocurrency market has been extremely volatile lately, with Bitcoin prices taking sharp swings both up and down. However, many top crypto experts believe — and our own analysis confirms it — that now is a good time to invest in the leading digital currency. They cite numerous positive factors driving institutional adoption of Bitcoin and its underlying blockchain technology, as well as increased political support from major governments around the world that recognize its potential as a store of value.

In addition to these macro trends, there is also the possibility that 2021 could see yet another “mini-boom” in cryptocurrency prices. Though difficult to predict accurately (prices are determined by market sentiment more than anything else), such an event could push BTC prices into five or even six digits, granting savvy investors huge returns on their initial investments. As always, it’s important to conduct your own thorough research before investing any money in cryptocurrencies — but for those willing to take risks for potentially large rewards, this could be a great time to get involved in the industry.

The information provided in this article is for educational purposes only and should not be considered investment advice or brokerage services. The crypto market is highly volatile and subject to sudden price swings, and investing in crypto assets can be risky. Any decisions made based on the information provided in this article are the sole responsibility of the reader. It is important to conduct your own research, consider your personal financial situation, and consult with a financial advisor before making any investment decisions. Technical analysis can be a useful tool for understanding market trends, but it is not a guarantee of future performance. Invest at your own risk.

Key Takeaways

The recent bounce in crypto prices has left many crypto enthusiasts scratching their heads and wondering if the worst is over for this iconic type of asset. While it certainly provides some reprieve from the brutal bear market that was taking a toll on prices, there remain a number of questions surrounding the extent, timing, and longevity of the current revival. Many investors are worried that what we are seeing is merely a dead cat bounce, where prices temporarily rebound amid a longer-term negative trend, only to resume the downward fall after that.

However, determining whether or not we have seen Bitcoin’s bottom is near impossible, given the unprecedented nature of today’s market environment. There are numerous key indicators, including geopolitical climate and economic performance metrics, which make it difficult to accurately predict short-term price action when so much can change in a matter of days or even hours. As such, investors should take any rally with a grain of salt and prepare themselves for both good times and bad while looking towards more reliable long-term gains.

Disclaimer: Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.