Six months ago, Bitcoin, the market’s best-known cryptocurrency, hit its all-time intraday highs at $68,991, but has since fallen nearly 50% against a backdrop of tightening monetary policies to combat high inflation.
According to market data consulted by Efe, Bitcoin fell this Sunday at 10.30 a.m. GMT by 49.92% from its highs recorded on November 10, 2021, to $ 34,550.
Since the beginning of the year this cryptocurrency has experienced a downward trend, with a decrease of 25.4% (closed 2021 at 46,333.65 dollars), in a few months that have been conditioned by the geopolitical tensions derived from the Russian invasion of Ukraine and high inflation.
As a consequence, central banks have changed their monetary policies, which have become more aggressive in the case of the US Federal Reserve (Fed), which has already made two interest rate hikes, the last one last Thursday with an increase of half a point, and more lax in the case of the European Central Bank (ECB) that, although at the moment he has not set a date for rate hikes, he has hardened his discourse and commented that he will begin to withdraw the stimuli enabled by the pandemic.
The director of Coinmotion for Spain, Raúl López, has considered that the Fed’s announcement about the increase in its rates put the markets on alert and “possibly” led to the loss of value of cryptocurrencies.
With the Fed’s first rate hike this year, which took place on March 16, Bitcoin retreated slightly, but at the end of the month it reached its highs at $47,967. However, when on April 6 the minutes of this body anticipated a possible more aggressive rise of half a point, this digital currency fell by 4.32%.
Last Wednesday, the Fed applied its second rise and since then the most popular cryptocurrency has lost just over 13%. That day it closed at $39,800.
According to analysts consulted by Efe, the loss of value of Bitcoin and its extreme volatility in recent months has responded to various factors, in addition to the tightening of the discourse of central banks.
Raúl López explained that geopolitical tensions, such as the war in Ukraine, and health tensions, such as the appearance of the coronavirus omni variant at the end of November 2021, have influenced its price.
He has also maintained that the European Commission’s MiCA proposal to regulate the cryptocurrency market generated “some fear in the markets.” Historical highs of Bitcoin
Since the end of 2020, the price of Bitcoin experienced an upward trend and soared from $ 10,000 to exceed $ 60,000 in the second quarter of 2021. Although it subsequently had a small correction, at the end of the year it registered its historical highs that touched $ 69,000.
This growth in the price of Bitcoin was motivated by various issues, such as its adoption as legal tender in El Salvador or China’s ban on mining and exchanging cryptocurrencies, which for Bit2Me’s director of institutional relations, Javier Pastor, could have an impact on speculators.
In addition, López recalls that inflation drove the “largest bullish rali in the history of Bitcoin”, as investors sought a condition to “make their capital profitable”.
Throughout the year Bitcoin has registered enormous volatility, however, some analysts suggest that this cryptocurrency is a safe haven because, as Javier Pastor recalls, “it is scarce and finite in its issuance”.
“It’s true that it’s volatile, but it’s volatile because its total market capitalization is still low,” Pastor says.
After the outbreak of the Covid-19 pandemic, the cryptocurrency market recovered much faster than the traditional market, which according to López, “was a sign at the time that cryptocurrencies could be a safe haven value.”
IG analyst Diego Morín recalled that Bitcoin is an “alternative investment” that attracts younger investors who seek to obtain a “return higher than what has normally been developed and conquered in the traditional market”, but also warns about its high volatility.
“In the same day we can see increases of more than 5% or corrections of more than 10%, so this must also be taken into account,” says Morín.
It is expected that the Fed will continue to tighten its monetary policies this year so, according to Raúl López, the markets will evolve depending on whether the measures adopted by these organizations are those expected by governments, which “in part could also influence the evolution of the price, not only of Bitcoin but of other cryptocurrencies.”
For his part, Diego Morín has warned that in 2017, with the previous cycle of increase in Fed rates, the first “abrupt” upward movement of this digital currency began and, therefore, he has assured that he does not rule out that in the coming months “some bullish rali will occur again in the case of Bitcoin”
