What’s Driving the Bitcoin Rally? And Will It Expand?

Following a tough last year, Bitcoin is off to a great start in 2023, but whether the recent rally will translate into a longer bull run and extend to the broader crypto market remains to be seen, according to many experts.

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According to CoinGecko, over the past 30 days, the asset has risen 40%, and has finally breached the $20,000 ceiling. Bitcoin was hovering around $23,000 on January 31. While this may be a sigh of relief for many, the asset’s price is at an all-time high of $69,044.77 since November 10, 2021, up 66.5%. decrease.

James Butterfill, Head of Research CoinSharesHe said the rally was driven primarily by recent macro events, such as lower inflation data from the US and Europe, suggesting monetary policy will be more accommodative in the coming year.

“As bitcoin and, more broadly, crypto assets are seen as a monetary policy inflation hedge, investors see opportunities in crypto assets following the more aggressive monetary policy action now,” Butterfill said. “After FTX, we saw Bitcoin finally reconnecting with macro data, barring bad news from Gemini and Silvergate.”

While interest rates continue to rise, FTX declines are likely to widen.

“But possible interest rate cuts are seen as the US and Europe face recession,” he said, “which could fuel an even more sustained rally in bitcoin in the second half of 2023.”

Some people expect a slow climb

As for why opinions are divided on the direction of prices, it mostly has to do with central bank policy and continued easing of inflation.

“There is no reason to believe that Bitcoin and, to a lesser extent, Ethereum will be disconnected from traditional financial markets anytime soon, even if they seem to be an inflation hedge,” said Arie Trouw, co. Founder XYO Network.

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There are different opinions on whether the rally will continue. Some, like Truve, have said that while this is the beginning of a long-term bull cycle for the digital asset industry, the recovery will be slower than in previous cycles.

“I also believe that 2023 will be the year of great reckoning for crypto, where 80% of assets will fade away because they lack substance, and the remaining 20% ​​will benefit greatly,” he said. “We saw the same pattern in the dotcom crash where empty companies with domain names failed, but some with solid businesses thrived.”

No bull market yet

While some are more cautious, the resurgence of digital assets underscores the resilience of this market, and it’s too early to call it a bull market.

“It looks like what we’re experiencing, at least on a large scale, is that the market is recovering from being oversold,” said CEO and co-founder Joe Ziolkowski. Relm Insurance. “It’s clear that as prices fell to record lows, retail and institutional buyers took the opportunity to accumulate various crypto assets. So part of this recovery appears to be these assets returning closer to their historical averages.”

Meanwhile, many experts argue that while the crypto market is partially recovering due to rapidly changing macroeconomic factors, it is crucial to focus on the long-term growth of crypto protocols like Ethereum.

For example, John Baller, founder of Opolis, said that market watchers have overlooked how much developer activity is happening on the network, including various scaling solutions that can quickly and cheaply leverage the broader Ethereum ecosystem.

“There are a lot of new applications being developed right now, including in the gaming and Defy spaces, and I suspect we’ll see an uptick in user activity in the coming years because of the next-generation protocols that are being developed right now,” he said. “But it will take time for these protocols to be fully developed. Until then, it’s important to focus on creating more uses for this gift and focus on the gift itself. It’s happening, but now is the time to build, build, build.”

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The views and opinions expressed herein are those of the author and those of Nasdaq, Inc.