Bitcoin has finally erased the losses related to the FTX collapse in November 2022. The largest cryptocurrency in the world was finally able to move above $20,000 and fastly went to $21,000. Bitcoin (BTC) and crypto investors are following the current move in the market to understand what could happen in the near future to BTC and other digital assets.
Bitcoin Surpasses $21K And Erases FTX Losses
Bitcoin moved above $21,000 for the first time since November 2022. This comes after a week in which inflation data in the United States was released for December with results in line with expectations. The CPI in the U.S. was released with a 6.5% rate in December 2022. This shows that inflation growth has been moving lower in the last few months, something that could push the U.S. Fed to pivot and reduce interest rate increases.
The Federal Reserve of the United States moved interest rates higher over the last year in order to reduce inflation rates and to push inflation expectations lower. This was relatively successful, as inflation is far from its peak and it could continue to move lower in the near future. Let’s not forget that after the COVID-19 pandemic, governments around the world started to print large amounts of money in order to help people deal with the lack of demand for work.
Nevertheless, after the reopening, the money printing was still there and this created large inflation rates around the world, not only in the United States. This push the U.S. Federal Reserve to increase interest rates. Other governments, especially in developing countries, have also increased interest rates even further. But this might be the time for central banks to analyse the possibility to stop the period of rising interest rates.
If that happens, Bitcoin could be definitely affected. We see this in how Bitcoin is now moving higher. Bitcoin is considered a high-risk and volatile asset. That means that when interest rates move higher, the price moves lower due to an outflow of funds that move towards less risky assets that are now more profitable. Instead, when interest rates move lower, it becomes much more difficult for investors to get a steady income with low-risk assets. This is where Bitcoin and digital currencies become demanded.
According to data shared by CoinGecko, Bitcoin skyrocketed to almost $21,100. This is the highest price since the cryptocurrency exchange FTX collapsed. Back in November 2022, FTX shut its operations down and closed. Its virtual currency tanked as well. Thousands of users have been affected by this issue, and many other companies have been exposed to this collapse. At that time, Bitcoin fell from $21,000 to below $16,000 for a short period of time.
It is now necessary to wait and see whether Bitcoin will stabilize close to the current price levels. At the moment, Bitcoin is being traded at $20,500 and it has a market capitalization of over $404 billion.