Bitcoin evangelists may breathe.
They must tell themselves that their wildest predictions will probably come true.
For several days now, prices of the most popular cryptocurrency have been on the rise, breaking with a see-saw momentum seen since the bankruptcy of the FTX cryptocurrency exchange on Nov. 11.
Bitcoin (BTC) prices were hovering around $20,749.71 at last check, according to data firm CoinGecko. They are up 22% in the last seven days. BTC prices on Jan. 13 even exceeded the symbolic threshold of $21,000. They had not crossed this threshold since Nov. 5.
BTC's current good momentum has unsurprisingly been hailed by billionaire Michael Saylor, one of the digital asset's staunchest supporters.
"#Bitcoin is the ₿est Strategy," Saylor wrote on Twitter on Jan. 14. MicroStrategy (MSTR) - Get Free Report, Saylor's software company, is one of the few large companies to have invested heavily in bitcoin.
Bulls Are Back
This possible inflection point would then have the consequence of avoiding a deep recession, particularly negative for risky assets such as cryptocurrencies. Investors therefore prefer to ignore the uncertainties linked to the bankruptcy of FTX still hovering over the crypto sector.
"We are technically still in a bear market, but the signs are the bulls are beginning to take back control," said Nigel Green, the CEO and founder of Fintech deVere Group. "The relief rally began on the back of the latest U.S. inflation data which was released on Thursday. It revealed U.S. CPI slowed to 6.5% in December from 7.1% the previous month.
"As inflation in the world’s largest economy is, it seems, being brought under control thanks to the Federal Reserve’s aggressive interest rate hikes, it makes it more likely that the central bank will begin to take its foot off the brake of the economy by slowing the hikes."
U.S. inflation declined in December, and slowed for a sixth consecutive month, data from the Bureau of Labor Statistics indicated on Jan. 12, further cementing the case for an easing in Fed rate policy over the coming months.
The headline consumer price index for the month of December was estimated to have risen 6.5% from last year, down from the 7.1% pace recorded in November and largely in-line with the Street consensus forecast.
Still Far From the Records of 2021
So-called core inflation, which strips-out volatile components such as food and energy prices, rose 0.3% on the month, and 5.7% on the year, the report noted, with both the annual and monthly reading matching Street forecasts.
These inflation data are likely to encourage investors to take a little more risk by betting on the asset classes that are mainly the promises for the future. Bitcoin is pulling the entire cryptocurrency market in its wake. The latter has risen above $1 trillion, but it is still far from the all-time high of $3 trillion reached in November 2021.
Prices of meme coins Dogecoin (DOGE) and Shiba Inu (SHIB) are up 17.4% and 20% respectively in the past seven days.
"The 'crypto winter' is thawing amid growing signs that inflation is beginning to cool," Green said. "Of course, the crypto market will not go in a straight line – no market ever does – but we expect the bears to go into hibernation and bulls are ready to run.”
While optimism seems to have returned, cryptocurrency prices are still far from their records set in the midst of the crypto craze at the end of 2021.
BTC prices had then reached the threshold of $69,044.77, while those of ETH had risen to at $4,878.26.