on the crypto
In the first two months of 2023, Bitcoin (quotation BTC) has had an amazing run. It is now up 41,45% year over year and trading at just over $23.479. But there are signs that Bitcoin is running out of momentum, as it is testing the $25.000 mark.
Although Bitcoin briefly touched the $25.000 level in mid-February, it quickly gave up the gains. And the last time Bitcoin flirted with the $25.000 level, in August of 2022, it finally sank below the $18.000 mark. As a result, it is commonly believed that $25.000 is a very important price level for Bitcoin. So can Bitcoin break through the $25.000 level or not?
Short-term prospects
When looking at just the short-term outlook, things look especially dicey for Bitcoin. Everyone is watching the Federal Reserve for signs of further monetary tightening. If the Federal Reserve continues to hike rates to tame inflation, Bitcoin will have a hard time clearing the $25.000 level. At some point, the Fed could trigger a recession, and that wouldn't help Bitcoin at all.
Also, the price of Bitcoin is now increasingly correlated with the performance of big tech stocks. Over the past 90 days, the correlation between Bitcoin and the Nasdaq, which is a technology sector, has been 0,75. This suggests that while cryptocurrency isn't marching in lockstep with the big tech companies, it is marching at roughly the same pace. If you've been following all the recent layoffs in Silicon Valley, this isn't good news for the cryptocurrency. This suggests that a real Bitcoin rebound won't happen until the tech industry fully recovers.
Long term perspective
However, if you take a long-term perspective, the outlook for Bitcoin brightens considerably. It's hard to deny that Bitcoin is being adopted globally. Almost all Bitcoin price predictions, such as Bitcoin at $500.000 or Bitcoin at $1 million, are based on a scenario where Bitcoin becomes relatively prevalent globally.
When Cathie Wood and Ark Invest came up with a revised $1,48 million price target for Bitcoin this year, it was based on the assumption that Bitcoin would experience tremendous growth in eight key areas. For example, in emerging markets, Bitcoin will eventually account for an increasing share of the M2 money supply, a common measure of the money supply. Among institutional investors, Bitcoin will account for an ever-increasing share of total portfolio holdings. At the same time, Bitcoin will increasingly feature on corporate balance sheets, used for cross-border remittances and held as a form of “digital gold.”
Is it worth buying Bitcoin?
Ultimately, whether or not to buy Bitcoin depends on your view of the market. If you only take a short-term view of the market, Bitcoin may not seem like an attractive buy right now. Why take on all the risk, volatility and uncertainty of cryptocurrencies when you can simply buy a big tech stock on the Nasdaq?
However, if one takes a long-term view of the market, Bitcoin below $25.000 appears to be a bold buy. The future growth prospects of Bitcoin look too good to ignore. While the price of Bitcoin may never reach the $1 million mark, it is hard to see how Bitcoin fails to reach its all-time high of $68.789,63. At today's prices, that would represent an almost 200% return on your investment.
