Vetle Lunde believes that extreme volatility would hit Bitcoin in both directions, although its current volatility is low. Novogratz said that the rate hike campaign of the Fed had affected the status of Bitcoin as a hedge against inflation.
After suffering steady drops for several weeks, the price of the pioneering cryptocurrency found relief as it reclaimed USD 20,000. Over the last few days, the situation has been favorable for most crypto assets, which have accumulated significant gains.
Market participants believe that the price of Bitcoin (BTC) will rise further as the overall sentiment around it seems optimistic.
Bitcoin is trading at around USD 20,229 and has accumulated a 4.0% gain over the last week. While its daily trading volume is above USD 31.71 billion, its market capitalization is about USD 387.81 billion, according to CoinGecko.
Various Factors May Drive the Price of Bitcoin Higher or Lower
According to Bendik Norheim Schei, research leader at Arcane, Bitcoin might reach USD 25,000 if kept trading above USD 22,500. The well-known analyst told financial news magazine Barron’s that he maintained a bullish stance toward the crypto asset.
Contrary to Norheim, Vetle Lunde, another analyst from Arcane, believes that Bitcoin will undergo huge volatility soon. He said that extreme volatility would hit the cryptocurrency in both directions although its current volatility is low. Traders are managing leverage in a limited trading environment, which leads to expectations around that volatility level.
The largest cryptocurrency by market capitalization has held its price above USD 18,000, indicating the support level is robust. The price of Bitcoin has risen above USD 20,000 mainly due to the profit pattern of US stocks over the past few days.
Market participants expect the US Department of Labor to release the Non-Farm Payroll figures in the coming days. That report provides data on the number of people employed in the previous month, which may influence upcoming Fed rate hikes.
The Bitcoin Price May Pull Back If the Fed Eases Its Policy
The price of Bitcoin will rise if the US Federal Reserve (Fed) refrains from aggressively raising rates to fight inflation. That was a recent statement by Mike Novogratz, the head of digital asset merchant bank Galaxy Digital.
The expert said that Bitcoin and other assets pulled back when Jerome Powell started hitting inflation on the head with a sledgehammer. He explained that the price of the leading cryptocurrency would unfold immediately after the chairman of the Fed gives up that fight.
Novogratz said that the rate hike campaign of the Fed had affected the status of Bitcoin as a powerful hedge against inflation. He added that their policy had a more significant influence through correlation with traditional financial assets than through inflation.
Anthony Scaramucci, the director of SkyBridge Capital, does not believe Bitcoin is a hedge against inflation. The expert considers the pioneering cryptocurrency first has to attract one billion users to obtain that status.
In August, Jim Cramer, the former Cramer & Co. hedge fund manager, said the tight monetary actions by the Fed would eliminate speculative cryptocurrencies.
George Soros, a former Quantum associate, and billionaire Stanley Druckenmiller predicted the rebirth of cryptocurrencies amid the collapse of the fiat-based economy. Besides, analysts at Grayscale said that the crypto winter might end at the end of March 2023.
Cryptocurrencies like Bitcoin are increasingly relevant in the global economy, which financial experts know very well. The recent recovery in its price provides hope to investors who view it as a hedge against inflation.
By Alexander Salazar
