Bitcoin prices reached a day-low at $19,440, and it seems like it isn’t the end for the reigning cryptocurrency’s price dip. 2022 saw the worst conditions for the crypto Market, with some analysts dubbing it the crypto winter. This mainly comes as a result of central banks increasing their interest rates to tackle rising inflation. So far, BTC prices have fallen by 60 percent this year, and investors are worried.
Crypto Strategist Blames Federal Reserve for BTC Price Dip
Nicholas Merten, a well-known crypto strategist, explains that Bitcoin’s prices could fall even further if the federal reserve doubles down on high-interest rates. As the host of DataDash on YouTube, he explained to viewers how Bitcoin could be on the verge of entering a bear market. His argument points towards the Federal Reserve’s stringent monetary policies.
Bitcoin to Face Selling Pressure In Near Future
He explains that previously, the reserve engaged in quantitative easing by printing more money. Now, they are doing the opposite with quantitative tightening, which involves raising interest rates.
Additionally, the reserve is looking to cut down on the balance sheet. This means eventually selling off mortgage-backed se securities. It could mean eliminating tens of millions of dollars from the total money supply. To summarize his point: the Federal Reserve is selling off assets for cash, and the amount of funds is slowly going down and coming out of the money supply.
Hence, it’s probable that BTC will see heightened selling pressure until the Fed finally reduces inflation rates and reaches the 2 percent target.
Bitcoin Could Hit Prices As Low As $10,000, Prompting A Bullish Run
Merten elaborates that if the Federal Reserve keeps hiking interest rates at their current trajectory, Bitcoin could see steady decreases in price. Eventually, prices can fall down to $10,000, but it may provide the necessary conditions to start a bullish run. Once Bitcoin reaches such low prices, people may steer clear of the digital asset and that it has gone down to zero.
But it’s possible that this new low could lead to a sudden price increase. It will provide exceptional buying opportunities when no one is willing to take that risk, save for a few investors.
Bitcoin’s Potential As Inflation Hedge
Despite the current uncertainty in the crypto market, investors are looking towards Bitcoin as a possible inflation hedge. This is due to certain aspects of the top-ranking crypto, such as its fixed cap of 21 million tokens. Analysts are of the opinion that a scarce supply of tokens, paired with the growing acceptance of cryptocurrency, could make digital assets such as Bitcoin a better hedge against inflation than alternatives like gold. Meanwhile, Bitcoin’s ability to act as an inflation hedge also depends on the time frame, with many investors Prompting that it will be more effective in the long run.