The cost of the most common digital asset, BTC, has started off 2023 in a positive way, with its value increasing about 28% since the beginning of this first month of the year.
On Saturday, the value of BTC surpassed $21,000 for each unit since early November.
While this is far from the highest value BTC has had since November 2021 which was at $68,990, it’s given many investors reasons to be hopeful.
The market is up this month, despite a gloomy 2022 where controversies and major bankruptcies occurred in Crypto business, including the failure of FTX, along with the major decrease in the market due to activities from the central bank.
According to experts, a few things have added to the increasing cost of BTC in the New Year, such as the probability of decreasing interest rates and the purchases made by huge “whales” which are huge buyers.
Could the new year bring a different monetary policy?
Recent inflation figures have been trending downwards and economic signals are pointing at a decrease in US activity. Investors have reacted positively to this news, speculating in which the Central Bank or Federal Reserve could modify or even change its rate-increasing plan.
The latest American inflation numbers released last week showed a slight decrease in which there was a monthly drop of 0.1% in the CPI, which was in check with the Dow Jones forecast.
Investors are carefully monitoring the unfavorable drop in job numbers, PMI services, and pay rates.
This, combined with the descending inflation rate, has resulted in an increase in confidence, occurring when BTC valuations are at their minimum. It is the hope of getting lax monetary policy due to the current low prices and macro data that has created this rally.
Supporters of BTC had previously indicated that it could act as a “protector” from instances of a rise in inflation. Nevertheless, in 2022, BTC took a 60% hit as other big economies and the US had to deal with above normal interest rates along with the increase of the cost of living.
The Federal Reserve will keep the interest rates elevated for now. In spite of this, some participants are somewhat hopeful that the Federal Reserve will reduce the rate of interest rate increases, or even reduce them.
This is due to the fact that the possibility of an upcoming recession is worrying central bankers.
The WEF reported on Monday that the vast majority of chief economists they surveyed anticipate that a global economic recession is most likely to happen in 2023.
The US dollar has been fading in comparison to other foreign currencies which are used for trading with US partners, hence it has dropped by as much as 9% in the past quarter.
BTC is usually measured against the US dollar, so when the dollar is weaker, it’s better for the cryptocurrency.
The crypto analytics organization Kaiko has suggested that more significant investors of digital assets, referred to as “whales”, may be driving the most recent spike in BTC’s (BTC) price.
The company mentioned that the regular trade size on the Binance platform had raised from approximately $700 on the 8th of January to $1100 presently, implying that whales have regained trust in the crypto market.
Those who are doubtful of digital money state this can make the market susceptible to control by a limited number of speculators with substantial heaps of tokens.
The mining of BTC has been growing increasingly difficult. Besides this, other elements are also at play.
The reduction in the rate of BTC has caused a number of miners to be removed. These miners use energy-intensive machines in order to confirm transactions and produce new tokens, and this has been made even more difficult by the drop in the cost of BTC and the rise in energy costs.
When miners sell off their possessions to pay their debts, it eradicates a lot of the selling pressure on BTC.
In the recent past, the difficulty of the BTC network has been increasing, which implies more data mining is being used to create new tokens and put them into circulation.
On Sunday, BTC.com reported that the mining complexity of BTC had hit an all-time high of 37.6 trillion. This implies that, on average, it would take 37.6 trillion attempts to locate a valid bitcoin block and add it to the blockchain.
Marcus Sotiriou, a market analyst at the digital asset broker GlobalBlock, stated in a note on Monday that “BTC mining difficulty is an indication of how hard it is to form the next block of transactions.”
He further stated that “BTC mining difficulty fell 3.6% prior to the recent update after some miners had to turn off their machines due to a winter storm.
However, miners now appear to have returned with newer and more efficient equipment.”
There is a chance that crypto traders may be able to start their new year off on a good note.
The ‘BTC halving’ is an event that is often seen as a cause of excitement for crypto investors. During the halving, the rewards given to miners are decreased and some investors consider this to be a positive thing because it can lead to a decrease in the amount of supply.
According to Ayyar, the current market conditions may be the start of a new cycle and the next halving is estimated to take place between the months of March and May 2024.
However, Ayyar warned that the current market conditions may cause a price dip if BTC closes below $18,000 in the upcoming days.
