Bitcoin has seen a resurgence this month, but is the crypto winter really thawing?
Here's what analysts thinkBy Rob Thubron 18 comments
In brief: Is the crypto winter showing signs of ending? Despite most token prices being nowhere near what they were at the start of last year and many businesses laying off workers, Bitcoin has seen a slight resurgence since the beginning of 2023, reaching its highest level since November.
Bitcoin finally passed the $20,000 mark over the weekend, having languished below that milestone since the start of November. BTC is currently at $21,161, and while that's around $20,000 less than it was 12 months earlier and far from the near-$69,000 all-time high, it's still a positive sign for investors who have endured crypto's most difficult year to date.
Last year's crypto winter kicked off when TerraUSD collapsed in May and was exacerbated by the implosion of exchange FTX. In addition to the falling prices of digital assets, including NFTs, last year saw lawsuits, bankruptcies, and thousands of job losses across the industry.
Some analysts fear things could get worse in 2023, with predictions of Bitcoin falling to $10,000 or even $5,000. Others have a more positive outlook, believing BTC will rebound this year to $50,000. One very optimistic venture capitalist thinks it will reach $250,000, which would represent an increase of around 1,400%.
With Bitcoin on the way up, it's starting to look like the naysayers could be proved wrong. CNBC reports that analysts are putting the rebound down to a couple of main factors, the first being the likelihood of central banks easing the pace of interest rate rises, or even cutting rates, as inflation cools—the consumer price index decreased 0.1% in December.
The other significant factor is said to be the 'whales,' those who purchase large quantities of BTC: just 97 wallet addresses control 14.15% of all Bitcoin. Crypto data firm Kaiko writes that the recent increase in the average trade size indicates renewed faith in the market by whales.
Another influence is said to be the halving—an event that occurs every four years in which the reward for Bitcoin mining is cut in half. This is expected to push up BTC's price, and while the next halving doesn't happen until 2024, it's already breeding more confidence in the future among investors.
The reality, of course, is that Bitcoin's price is unpredictable. Any resurgence is good news for buyers and sellers, there are plenty of positive signs, and we do seem to be past the worst of the crypto winter, but things can change very quickly in the cryptocurrency world.