Could a Strengthening Economy Hurt Bitcoin?

Bitcoin has had a great year thus far, but there are some that say with the economy getting stronger, the present rally it’s enjoying won’t last.

Bitcoin May Not See Its Present Rally Last

Among the analysts who feel positive towards bitcoin is OANDA’s Craig Erlam, who stated:

It has been a phenomenal start to 2023 for bitcoin.

2022 was easily the worst year on record for the world’s number one digital currency by market cap. After reaching a new all-time high of about $68,000 per unit in November of 2021, the asset lost more than 70 percent of its value over the next 12 or 13 months and by the time 2022 was over, the asset had dropped to the mid-$16K range. It was a sad sight to see.

However, things didn’t quite stop there as many of bitcoin’s crypto cousins chose to follow in its footsteps. Before long, every major digital asset was traveling through the doldrums and the crypto space lost more than $2 trillion in overall valuation. Investors have been feeling the heat and their digital wallets are no doubt experiencing a lot of emptiness right now.

However, bitcoin appears to be coming back in a small way. January and February of this year were decorated with additional price bumps, with bitcoin hitting a new six-month high of $25K just a few weeks ago, and there are many out there who think the space could once again rise through the financial ranks this year. Erlam continued with:

The bitcoin rebound has been particularly extraordinary, and the very thing that caused it so much trouble towards the end of 2022 may be driving the strong rebound now. The thing I’m referring to at the back end of the year is the FTX collapse and the prospect of contagion/revealing of other bad actors that was not nearly as bad as feared… So, not only has bitcoin bounced back; it’s done so fiercely, and many will now be questioning whether the worst is behind it.

While his comments are filled with positivity, others are spelling out a scenario of gloom and doom. For example, Fawad Razaqzada – market analyst at City Index – stated that with the economic prospects for America and beyond becoming so strong in recent weeks, he thinks BTC will have a hard time standing out given how well other assets may do as well. He mentioned:

If concerns about growth intensify, then crypto assets might struggle to sustain this recovery.

Inflation Might Go Down Soon

Right now, inflation is set to fall back a few steps, which Razaqzada thinks could get in the way of crypto’s recovery.

However, it was clear last year that crypto only suffered as inflation and interest rates went up, so moving in the opposite direction could be the answer everyone’s seeking.

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