Why is Bitcoin going up? Crypto prices rally after tough 2022
Since the turn of the year the cryptocurrency markets have enjoyed a slight resurgence but remain far below the 2021 peak.
Cryptocurrency markets have started the year on the front foot after plunging during 2022. The price of Bitcoin, the most widely-used digital token, has risen by around 26% since the turn of the year and hit $21,000 for the first time since 7 November.
This rise could be a sign that confidence is returning to the market after a tumultuous year beset with interest rate hikes and cryptocurrency scandals.
The Federal Reserve implemented seven interest rate hikes during 2022 which sent stock prices and cryptocurrency assets into a tailspin. In December the central bank upped the borrowing rate to 4.50%, the highest level seen since 2007.
But after signs that inflation is slowing there is renewed hope that the Fed may be able to lower interest rates later this year. This would likely bring a solid stream of new investment into the industry and serve to push up prices across the board. However any hopes of a return to the 2021 peak, when Bitcoin was trading above $64,000, still seem a long way off.
Markets begin to bounce back after FTX aftershocks
While central bank policy had an undeniable effect on markets last year, the cryptocurrency market was hit by a major scandal that shook investors’ faith. The collapse of FTX, one of the largest digital exchanges, saw billions of dollars in value lost in a matter of days and investors blocked from withdrawing funds.
The company’s CEO and founder Sam Bankman-Fried has been charged with multiple counts of fraud and criminal conspiracy as a result. The affair highlighted many of the concerns that investors typically have when it comes to the largely unregulated crypto markets and values plummeted.
In early November, as rumours about an impending collapse were circulating online, the price of Bitcoin slumped from around $21,000 to less than $16,000 in a matter of days. The January rise could be seen as little more than a bounce-back from the FTX scandal that rocked the industry.
Anthony Scaramucci predicts positive year for Bitcoin
In recent days the rising price of Bitcoin – usually a barometer for crypto markets more generally – has sparked hope among investors that 2023 could see sustained gains made across the board. The market’s total value has once again climbed above $1 trillion and some investors are considering a return to the tempestuous waters of cryptocurrency.
Anthony Scaramucci, briefly the White House communications director during the Trump administration and now chief executive of SkyBridge Capital, believes that 2023 can be a “recovery year” for Bitcoin.
“You are taking on risk but you’re also believing in [bitcoin] adoption,” he told CNBC during a crypto conference last week. “So if we get the adoption right, and I believe we will, [Bitcoin] could easily be a $50,000 to $100,000 asset over the next two to three years.”
It should be noted that FTX bought a 30% stake in SkyBridge Capital last September. Scaramucci claims that this deal was based on fraudulent information and that SkyBridge stands to buy back that stake once the bankruptcy court has issued a ruling on FTX’s obligations. However the link between the companies does give reason for Scaramucci to hope that confidence returns to the markets.