Saturday saw Bitcoin surge over $21,000, giving investors hope that the cryptocurrency may have hit its lowest point and inflation has peaked. Investors seemed optimistic about the future prospects of Bitcoin, as its price climbed to heights not seen before in its tumultuous 12-year history.
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Bitcoin surged past the $21,000 mark on Saturday, spurring optimism that it may have bottomed out and inflation has peaked. The largest cryptocurrency rose as much as 7.5% to $21,299, before paring gains later in the day. This was the highest point it had reached since early November, with Saturday being the 11th consecutive day of increases.
The second-largest token Ether saw growth of 9.7%, while Cardano, Dogecoin and Solana all experienced notable gains.
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The crypto universe achieved a significant milestone of having its market cap reach above $1 trillion for the first time since early November. The news drove optimism in the sector and many cryptocurrencies saw marked increases – most notably Bitcoin whose value rose as much as 7.5%
According to a preliminary survey by the University of Michigan, short-term inflation expectations in the US have dropped to their lowest level in almost two years, boosting consumer sentiment. Additionally, consumer prices have increased by 6.5% in the past year, which is the lowest inflation rate observed in over a year.
The data is showing that inflation is decreasing, providing relief for people who purchased used cars, plan road trips, and bought new furniture. However, prices are still increasing for various goods and services, such as food and car maintenance. The question remains as to how quickly inflation will decrease from its previous low levels near 2 percent after 18 months of rapid growth.
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The Federal Reserve is expected to reduce the magnitude of its interest rate increases as well. As inflationary pressures subside. However, the Fed is likely to maintain its hikes until it can definitively confirm a slowdown.
Bitcoin’s price had been fluctuating between $16,000 and $17,000 for several weeks before its recent surge. Unexpectedly, this upward trend has resulted in negative consequences for those who had placed short bets but couldn’t be a better sign for the bulls.
The recent rally of over 20% for Bitcoin, has been met with enthusiasm, however, it is still unclear of what has caused this increase and if it can be sustainable.
The most widely accepted explanation for Bitcoin’s recent recovery is the recent positive macroeconomic news, specifically the reports of easing inflation. The value of cryptocurrency is known to be influenced by the larger economy, with investors tending to invest more in them during favorable economic conditions. Therefore, it is likely that the recent gains in Bitcoin’s value can be partly attributed to the latest Consumer Price Index (CPI) report released by the Labor Department.
History tells us that Bitcoin is highly dependent on momentum and has seen extended rallies despite many mainstream investors disregarding it. Its core value proposition – a secure and decentralized form of digital money – remains, even while the wider crypto sphere appears to be going through its most challenging period in recent memory.
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