Over the course of the last week or so, the Bitcoin and crypto markets have made a recovery, and many people believe that this has finally signalled the end of the bear market, particularly after Bitcoin successfully broke back above the key $20k level.
This is a completely expected pullback for crypto
The rally in the Bitcoin market over the course of the last few weeks has excited a lot of industry participants, many of whom have become far too pleased with the recent rally, and called for much higher prices.
Although one expects volatility in the crypto markets, it would be highly unusual for the price of any asset to continue to appreciate without even the slightest retracement.
Many analysts who managed to keep their feet to the ground on this rally (which historically wasn’t stunningly impressive) had been warning that there would be a retracement and that many people would be caught unaware.
Crypto markets are still bearish on normal timeframes
Over longer term time frames, the markets remain bearish, and it is still too early to say that the bear market has been completely invalidated, or that we have certainly bottomed out.
The Bitcoin price may have appreciated by double digit percentages since the lows of $15k, but there are still a lot of prominent analysts who continue to call for the price to fall much further.
Recession fears are still strong
The markets are still very concerned about the possibility of a recession, as falling aggregate demand continues to plague the economy alongside continued disruptions to supply chains.
The average market cycle in the stock market is roughly 6-7 years, but thanks to an inordinate amount of quantitative easing measures the central banks have managed to “kick the can down the road”, and it now seems as though they are being forced to pay the price.
Market is bouncing more than expected, that is a certainty. Now… is the bearish scenario invalidated?
I'm going to explain why I think new lows are still likely.
— il Capo Of Crypto (@CryptoCapo_) January 14, 2023
Powell is adamant that he will continue to raise rates
The inflation problem is still huge, and Chairman Powell is adamant that he will be the one who solves it during his tenure at the Federal Reserve.
Whether or not he will be able to mirror the successes of one of his predecessors, Volcker, remains to be seen.
However, he is certainly keen to keep the inflation situation under control, as he sees it as potentially far more damaging to the economy in the long term than a liquidity crunch.
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