Cryptocurrencies are one of the most popular asset classes in the world, owing not only to their profitability but also to the fact that they are so easily accessible. Yet, the market is also known for its volatility, with prices often recording significant fluctuations, often from one day to the next. In 2022, crypto struggled quite a lot, with prices sinking lower than they had been in a long time. As of 2023, values have begun returning to their usual levels, but it’ll still be a while until crypto returns to its 2021 glory.
However, exchanges like Binance have begun noticing investors looking to buy Bitcoin again. In fact, the coin has recently skyrocketed, being mainly behind the increased interest in digital money. It is also one of the most popular assets to own across all different categories. However, investors remain watchful of how the market will develop. The exact values you can expect in the future are impossible to predict, yet you should be mindful of several factors that can influence it.
While all asset classes have a certain degree of volatility, and you cannot hope to become an investor if you’re incredibly risk-averse, cryptocurrencies are slightly more volatile than the rest. Even Bitcoin, the blueprint for all the altcoins and the most widely-recognised crypto, is not free from market fluctuations. The reason for this is that prices within the cryptocurrency ecosystem are affected by supply and demand levels. Investor sentiments and media hype are also fundamental, but if there’s something that all these factors have in common is that they’re all highly changeable. And when they all work together, they create definitive oscillations.
Now, analysis has revealed that the Bitcoin price might also be sensitive to the monthly US inflation releases. The annual inflation rate of the consumer price index is set to ease to a little under 5%, less than the original estimates. This has given the general public hope that the trend favours a lowering tendency. Researchers have observed that, historically, the BTC price has recorded increased volatility, particularly in the six-hour window before and after the inflation data. This is intraday volatility, the measure of the annualised standard deviation pertaining to daily percentages of commodities.
Around data releases, intraday fluctuations remain particularly elevated, and the trend is expected to continue in the future. The American Federal Reserve has recently announced that the monetary policy will continue to become even more data-dependent, meaning that Bitcoin will also be affected by the changes.
Predicting the value of cryptographic currencies is difficult, mainly because you cannot predict how all the factors that influence it will evolve. The market has long been caught in a bearish tendency, and investors are uncertain about how the prices will grow. Bitcoin had a promising start and even briefly surpassed the $30,000 mark earlier this year. Since then, however, it has dropped to $29,000 and $28,000. Since May, it has been struggling in the $27,000 range. All these changes and fluctuations have led investors to feel uncertain about what the future holds.
Some crypto communities, however, have attempted to shed some light on the situation. One group, known to be quite successful, holding a historical accuracy figure of roughly 82% when it comes to predicting future prices, has recently offered their two cents. The projections are based on the opinions of nearly 10,000 members, who believe that Bitcoin will likely decline by the end of May. If these predictions turn out to be accurate, it would be one of the most significant negative trends since 2022.
Nonetheless, it’s crucial you don’t lose hope. Bitcoin has surprised investors before and turned around even when everything seemed hopeless. It’s not far-fetched to believe it could do the same thing again and surprise everyone. Even the predictions coming from specialists can be off. Ultimately, the only thing a well-prepared investor can do is create a strategy that can withstand several different scenarios.
Just a year ago, Miami hosted an annual crypto conference. At the time, the city was one of the most crypto-friendly in the world and the biggest promoter in the United States. Currently, that enthusiasm has somehow dampened in the context of scepticism following the collapse of several exchanges during 2022. The owners of the companies have been charged with financial crimes, most notably fraud, after customers lost considerable amounts of capital overnight.
And while the market has been steadily rising throughout 2023, it remains clear the crypto’s reputation took some severe hits. The overall market cap is down 60% from November 2021, when it reached some of its highest values ever. Yet, Miami officials have declared that they don’t regret moving towards innovation and wanting to adopt digital finance. It was an excellent opportunity then, and it will most likely be again soon. Until then, however, the overall market still has to recover more.
While the United States has been at the forefront of crypto regulation adoption, with its crackdown on exchanges and banks forcing many to cease operations immediately, Europe has also been taking steps in that direction. The UK has recently announced that it will adopt a set of regulations over the next twelve months aimed not at inhibiting the market but rather to help it develop. However, through the course of the development, the companies involved must remain careful not to do anything that could be an infringement on user rights.
The EU Parliament has also voted 517 in favour to 38 against to pass the MiCA, the Markets in Crypto Act. Similar to the UK, this legislation seeks to reduce consumer risk and will hold providers liable if investors lose their assets. The UK also wants to impose particular rules for custodians so that the situation of last year isn’t repeated.
To sum up, many things are currently influencing the crypto market. From traditional finance movements to regulatory measures, you should be prepared for shifts in the ever-changing crypto sector over the future as well.
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