Bitcoin on the Rise: Is This Current Rise Enough to Restore Investors' Confidence in Crypto Just Yet?
In 2022, cryptocurrency investors experienced a rollercoaster ride, with prices plummeting after reaching all-time highs in late 2021, leading many to lose faith in the digital asset class. The crypto space of late can be described as a shade of everything, from good when Bitcoin, the largest cryptocurrency by market value, recorded its historic high in November 2021, too bad when the dip continued and Bitcoin’s price dropped by 65% in 2022, too ugly when the sector was rocked by some unpalatable news, such as the FTX filing for bankruptcy in October 2022, which cast doubt on the sector, resulting in a loss of confidence in cryptocurrencies as well as mass layoffs that greeted crypto startups all over the world.
Cryptocurrencies such as bitcoin and Ethereum have been increasing in value this year, with a rise in the last 30 days. Bitcoin BTC tickers down $22,872 and reached a four-month high above $21,000 in the third week of January, adding to traders’ optimism. Because of the January BTC price rebound, the market has seen the most significant investor optimism since July.
Trading Crowd Sentiment on Record High as Crypto Appreciate
According to data from the crypto analytics firm Santiment, trading crowd sentiment is at its highest in six months and the second highest in the last 14 months. According to the data, traders are viewing Bitcoin’s price rebound as a precursor to a larger breakout in the near future.
Source: Santiment
Since 2021, there have been three major spikes in investor sentiment, as shown in the chart above. The first significant increase in sentiment occurred in November 2021, following which the BTC price soared to a new all-time high of $68,789. The second major spike occurred in July 2022, following hints from the US Federal Reserve about possible inflation relief, and was followed by a minor price increase. Despite the fact that the price increase following the spike in crowd sentiments in July 2022 was not significant due to market-wide bearish sentiment, traders did buy the dip at $19,000.
The most recent surge in crowd sentiment occurred following a long winter in 2022. According to market analysts, the BTC price rebound could indicate a market bottom.
This has made both traders and enthusiasts in the crypto space optimistic about its prospects this year, as well as signaling the end of the global crypto ecosystem’s woes. In any case, the current rise in crypto prices is unquestionably a step in the right direction, but is it sufficient to restore investors’ confidence in the crypto markets? Or it’s just a flash in the pan?
In any case, the current rise in crypto prices is unquestionably a step in the right direction, but is it sufficient to restore investors’ confidence in the crypto markets just yet? After all, crypto prices have risen and fallen numerous times in recent years, and many investors have been burned by the volatility. However, the current rise appears to be distinct from previous ones in a few key ways, particularly because a number of significant Crypto trading trends are pointing upward for the first time in many weeks. First, we’re seeing a much broader rally this time, with a wide range of cryptocurrencies increasing in value. Ethereum has experienced weekly gains of more than 8% as a result of its effortless breach of the $1,6020 price level.
Furthermore, with Saturday’s unexpected increase, Bitcoin’s seven-day gains are now at 9%, with a 30% increase over the last 30 days. Bitcoin’s price has dropped by 65% from its all-time high of over $69K in November 2021, but recent gains suggest that the cryptocurrency market is on the mend following a difficult 2022.
Source: CoinJournal
Second, rather than retail investors, institutional investors have driven the rise. These factors suggest that the current rally may be more durable than previous ones.
According to data, bitcoin has increased by at least $7,000 since its November lows. Bitcoin, along with major market leaders Ethereum and Solana, surged to levels not seen since August 2022 on Saturday, January 21st, 3023.
The overall market capitalization of the cryptocurrency sector is currently $990 billion, up more than 4% from the previous day, indicating that the market is also waking up.
Traditional markets also saw gains for the week, with the S&P 500 rising more than 2% as the fourth quarter earnings season began and US inflation numbers, while still elevated, continued to fall. The first monthly decrease in inflation in 2.5 years, as well as more significant annual declines in both the headline and core readings, have fueled optimism.
The bulls’ struggle, which lasted for a few days, appears to be over, at least temporarily, as BTC had one of its most remarkable overnight price increases in recent memory. It increased it from under $21,000 to more than $23.2K.
Reasons for the gains
The main reason for the crypto market surge is a slowdown in wage growth and a decline in services sector activity in the United States, signaling that the Federal Reserve will be less aggressive in raising interest rates.
Furthermore, despite a critical recent week, Bitcoin and Ethereum values remained far above important support levels. In addition, cryptocurrency prices rose after the release of the FOMC Minutes.
Several macroeconomic considerations point to lowering inflation and global economic recovery. China’s openness of international borders, as well as measures by other central banks to reduce inflation, has improved investor confidence. As a result, Asian and European stock markets are starting in the green.
How this will affect the African Crypto Ecosystem
According to Chainalysis, Africa has one of the fastest-growing crypto marketplaces in the world, with crypto transactions topping $20 billion per month in mid-2021. The region’s most active users are in Kenya, Nigeria, and South Africa.
Despite the fact that one-quarter of Sub-Saharan African governments have legally regulated cryptocurrency, two-thirds have adopted certain limitations, and six countries have banned it, the asset class is gaining traction on the continent. This is not unrelated to the younger population’s growing digital competence and internet penetration in recent years.
Despite the fact that just a few governments on the continent have officially accepted cryptocurrency. The Central African Republic made Bitcoin a legal tender last year. However, the adoption of central bank digital currency (CDBC) by various African nations has been on the increase due to the promise of a more efficient financial system that Bitcoins and other cryptocurrencies have to offer. Tunisia was the first African country to shift its national currency to a blockchain platform in 2019, thanks to the Monetas universal contracting platform.
Also, South Africa, which has since positioned itself as one of Africa’s most crypto-friendly countries, Nigeria, Morocco, Senegal, and Ghana have either launched or are in the process of launching their version of a national digital currency based on blockchain and designed to be compatible with other digital currencies in Africa. These central bank digital currencies (CBDC) have the same value as the respective nations’ currencies and may be saved in any mobile money or e-money wallet.
Couple with a growing tech-savvy population, internet penetration, inflation-battered national currencies, and this current “if you can’t beat them join them” approach by the respective African government, there is no gain in stating the fact that Africa is ripe for more crypto adoption as startups in the sector received a whopping $340 million in VC funding in H1 2022, more than doubling the $ 127 million raised in 2021, according to a research conducted by blockchain investment firm Crypto Valley Venture Capital (CV VC) and Standard Bank.