Bitcoin soared to a fresh all-time high above $73,000 this week, but the cryptocurrency’s volatile movements highlight the mixed signals and uncertainty in the market. According to data from Santiment, a crypto analytics firm, Bitcoin’s volatility has been extreme, with the price reaching $72,700 on one day before plunging over $3,800 to $68,900 just moments later.
Surprisingly, it happened within thirty minutes after Santiment picked up on a FOMO (fear of missing out) sign that came along with various trading calls for purchase and other bullish keywords. Nonetheless, the crypto markets appeared to be reacting to inflation figures that could have influenced the interest rate plans of the Federal Reserve for 2024.
Bitcoin lost ground following the release of U.S. Consumer Price Index (CPI) numbers for last month, showing higher-than-expected inflation at 0.4%. On an annual basis, CPI went up to 3.2%, compared with estimates of 3.1% and last month’s reading of 3.1%. Since inflation keeps rising, concerns are growing that the Fed may need to keep rates high longer in order to tame surging costs.
Bitcoin: Analyst Insights and Market Cycles
Despite the volatility and mixed signals, some analysts see Bitcoin’s record highs as the start of a new bull market cycle. According to Mags, a popular crypto analyst, “The real bull market starts once Bitcoin breaks above its ATH and enters price discovery.” However, Mags notes that price tends to top out within 9-12 months after a new all-time high is set based on prior cycles.
In 2017, Bitcoin surged over 1300% before peaking 9 months after its breakout to new highs. The 2021 cycle saw around 250% gains before topping 12 months after the record. “If we witness something similar, we can expect price to top out in next 9-12 months,” Mags stated, while providing bitcoin price targets as high as $210,000 based on 200% growth from current levels.
Other market commentators have highlighted the psychological challenges that bull markets present versus bear markets. A well-known analyst stated that in a bear market, there are almost no decisions to make – you simply buy and wait for the market to recover.
In contrast, a bull market forces active decision-making amidst constant fear that your portfolio has topped out and you are missing out on further gains. The solution proposed by this analyst is to dollar cost average out of positions, just as you dollar cost averaged in initially. Get used to taking profit, even if it does not end up being the absolute peak, they counseled.
However, analysts and investors will be watching Bitcoin’s price swings, which show no sign of slowing down to determine whether the recent spike in the cryptocurrency is a sustainable upswing or another case of speculative froth. However, for now, volatility and divergent market signals are likely to continue.