Since November 7, 2022, Bitcoin, the leading cryptocurrency, has shown no signs of recovery. On Thursday, January 14, 2023, the cryptocurrency, which had been trading below $17,000 since the FTX issuance, broke above $21,000.
Although this is a far cry from the $68,000 price that the cryptocurrency plunged to, traders, investors, and enthusiasts were happy to see the ray of sunshine ahead.
The total value of the cryptocurrency market increased by approximately 19%, from $831 million in November 2022 to $990 million.
Green traces on the cryptocurrency chart can be a signal to invest and make a profit. However, it is important to understand why the market is expanding and whether it is sustainable. Because the US economic metrics were better than expected, Bitcoin is now more popular. For example, the decline in inflation from 7.10% to 6.5% encouraged traders to expect lower interest rates.
Bitcoin was once a means of inflation protection, but that was not the case in 2022. Similar to how the stock market responds to micro and macroeconomic factors, cryptocurrencies act in a similar way.
What is contributing to the increase
The increase has also been attributed to whale activity. These are individuals or entities that purchase a large enough amount of cryptocurrency to move the market.
The increasing difficulty of mining is causing the bitcoin price to rise. According to BTC.com, the mining difficulty has reached 37.6T, which means that it takes 37.6T to find a valid Bitcoin block and add it to the blockchain.
While some economic factors work in bitcoin’s favor, this does not guarantee that things will stay the same. The economic situation in the United States does not affect the macroeconomic conditions that will affect cryptocurrencies in the long term.
The world economy will grow by 1.7% in 2023, indicating slow growth. Based on what happened in 2022, this figure may be lower than the World Bank predicted.
