Will Bitcoin break $35,000 this month?
Bitcoin, I believe, could hit $35,000 this month if the momentum in the crypto market continues at the current pace.
Right now, the world’s largest cryptocurrency is around $28,030, with its market capitalisation having jumped 25.46% in the last seven days. Ethereum has gained 1.11% to $1,797, after rising 11.33% on the week. The global crypto market capitalisation added 2.6% to $1.18 trillion in the same period.
Of course, no-one has a crystal ball, and predictions are notoriously difficult to make for crypto markets which are famously volatile.
However, there’s a strong case to make, based on four key pillars, that Bitcoin will reach this important threshold before the end of March.
First, the US Federal Reserve and five other major central banks are taking fresh measures to improve global liquidity as traditional financial markets remain jittery from the turmoil hitting the banking sector.
In a joint statement on Sunday, the central banks said that from today, they would switch from weekly to daily auctions of dollars in a bid to “ease strains in global funding markets.” The daily swap lines between the Fed and the European Central Bank, Bank of England, Swiss National Bank, Bank of Canada and Bank of Japan would run at least until the end of April, the officials said.
Swapping lines between central banks effectively increases the supply of dollars in the global financial system. This could lead to a decrease in the value of the US currency relative to other currencies, as the increased supply of currency can reduce its purchasing power, making it less attractive to hold compared to other currencies.
Inevitably, this will prompt investors to look for alternatives, such as Bitcoin, which has a limited supply of 21 million.
Second, the crunch in the banking sector – which has resulted in UBS agreeing to buy the embattled Credit Suisse for $3.2 billion on Sunday, with the Swiss National Bank also pledging a loan of up to $108 billion to back-up the takeover, and the second and third biggest bank failures, Silicon Valley Bank and Signature respectively, in US history in recent days – strengthens the case that central banks will need to ease up on interest rate hikes.
Central banks know that besides having to try and tame stubbornly high inflation, they also need to ensure financial stability. The events of the last week or so, which rocked confidence, will certainly give them cause for pause.
Lower interest rates typically lead to increased liquidity in financial markets, as investors are more willing to invest in riskier assets, such as crypto, with the expectation of higher returns. This increases demand and potentially drives-up prices.
Third, the current bull run in Bitcoin is sparking FOMO (the Fear Of Missing Out) among new investors who are putting fresh money into the market.
And fourth, with the spotlight back on Bitcoin, potential and existing investors are reminded of the inherent values of a borderless, global, digital, decentralised, tamper-proof, unconfiscatable currency.
Against this backdrop, and with prices already nudging $30,000, it is not unreasonable that the crypto will hit $35,000 in the next 10 days, which would positively impact prices across the market.