Slowed Down Inflation Welcome Change for Crypto Markets
by Wieke Beenen
The price of bitcoin has increased by more than 20 percent in seven days. The value went up to $20,847 (19,244 euros) on Monday morning. A week earlier, the digital coin was worth about $17,000.
The price has mainly gone up because investors expect that there won’t be any more rate hikes.
Recently, the central banks had drastically raised interest rates to curb inflation. But now it seems that the inflation may have finally peaked. As a result, interest rates will likely not rise as quickly as last year.
When interest rates are high, households tend to spend less and save more, and companies are more cautious to invest large sums of money. But rising interest rates and quantitative tightening from global central banks have also played a key part in the recent bear market. This is because interest rate hikes generally result in a sell-off of risk-on assets such as stocks, but also crypto.
The Fed raising interest rates is supposed to cool inflation and slow down an overheating economy, but the Fed’s rate hikes have so far only had a negative impact on crypto, causing prices to decrease over the last 9 months.
The crypto market took a beating in the spring of 2022. The value of bitcoin, among other things, fell sharply: from more than $ 45,000 in April to $ 19,000 in June. There was a new blow of trust in November, when crypto exchange FTX collapsed. Since then, the bitcoin price has fluctuated at around $17,000.
The current slowed down inflation seems to be a welcome change for gaining back trust and seeing crypto prices increase again, as markets are seeing the new year start with a fresh clean canvas of opportunities.
The second-largest crypto coin Ethereum also rose sharply in value. Investors paid $1,542 for it on Monday morning. That is more than 16 percent more than a week ago. Other digital currencies also went up.
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