Title: Bitcoin and Major Cryptocurrencies Lose Momentum, but a Leak Gives Hope
Bitcoin, alongside other major cryptocurrencies like Ethereum and XRP, has experienced a loss of momentum following its surge in 2023. However, a surprise leak from a major tech company suggests that the tide might be turning. This article delves into the recent decline in Bitcoin’s price, the potential effects of U.S. dollar inflation, and how institutional interest in cryptocurrencies is growing. Additionally, it highlights the importance of staying informed about market developments through Forbes’ CryptoAsset & Blockchain Advisor.
The Decline in Bitcoin’s Price
Bitcoin’s price has lost about 60% since reaching nearly $70,000 per bitcoin in late 2021. This decline has wiped out around $2 trillion from the total cryptocurrency market. The market has been affected by the loss of momentum in Ethereum, XRP, and other cryptocurrencies. Nevertheless, a leaked insider tip could change the current situation.
The Impending Historical Bitcoin Halving
Bitcoin is approaching its historical halving, an event that is expected to create chaos in cryptocurrency prices. Subscribing to the free CryptoCodex daily newsletter from Forbes will help traders, investors, and the crypto-curious navigate the future of the market before next year’s halving.
The Potential Effect of U.S. Dollar Inflation
In light of the Federal Reserve’s struggle with a $33 trillion U.S. “debt death spiral,” analysts at Jefferies warn that the Fed might be forced to restart its money printer. This move could potentially collapse the U.S. dollar and fuel a boom in bitcoin prices to rival that of gold. Jefferies’ global head of equity strategy, Christopher Wood, wrote that central banks, including the Federal Reserve, are unlikely to transition smoothly from unconventional monetary policies, ultimately leading to ongoing central bank balance-sheet expansion. In this scenario, bitcoin and gold would serve as critical hedges against inflation.
The Fed’s Efforts to Reduce Balance Sheet size
The Federal Reserve began the arduous task of reducing its near-$9 trillion balance sheet in 2022 after expanding it due to the Covid-19 pandemic and subsequent lockdowns. Quantitative tightening involves extracting liquidity from the financial system and transferring the burden of newly issued debt to the private sector. Furthermore, the Fed has been increasing interest rates to combat rising inflation, potentially exacerbating a “death spiral” for the U.S. dollar and propelling bitcoin prices upward.
The Possibility of a Dovish Fed
If the Fed faces a larger-than-usual lag in reducing inflation through interest rate hikes, it might be compelled to adopt a dovish stance amid a U.S. recession. A failure to exit unorthodox monetary policies in a benign manner could result in the collapse of the U.S. dollar paper standard, benefiting owners of gold and bitcoin.
Rising Institutional Interest in Bitcoin
Bitcoin has recently witnessed a significant rise in institutional interest, spearheaded by BlackRock, the world’s largest asset manager. With custodian arrangements in place for digital assets, bitcoin has become an investible option for institutions, presenting an alternative store of value to gold.
While bitcoin and other major cryptocurrencies have lost momentum in recent times, a leaked tip from a major tech company could instigate a turnaround in the market. The potential collapse of the U.S. dollar due to inflation and ongoing central bank balance-sheet expansion might ignite a surge in bitcoin prices, making it an attractive hedge against inflation. Meanwhile, institutional interest in cryptocurrencies, led by BlackRock, is steadily increasing. Subscribing to Forbes’ CryptoAsset & Blockchain Advisor will ensure that readers stay ahead of market developments and capably navigate the rollercoaster ride that lies ahead.