Why is Bitcoin going up? – Forbes Advisor
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The price of Bitcoin (BTC) has been on a wild ride this week, thanks to the fall of Sam Bankman-Fried and leading crypto exchange FTX.
As the FTX saga unfolded this week, BTC plunged 25% from Monday morning to Thursday evening. But since last night, the leading crypto has jumped 10% higher, possibly due to greater market optimism that peak inflation has arrived.
Ethereum (ETH), the world’s second largest cryptocurrency, has followed a similar price path this week. ETHs have seen a steeper decline from Monday morning to Thursday evening, down a total of 32%. Since last night, ETH has jumped about 15% higher.
Why Is Bitcoin Rising Today?
Until this week, FTX was the fourth largest crypto exchange in the world and was considered an industry powerhouse. But a series of press revelations about the questionable finances of the exchange and its sister business, Alameda Research, both founded and run by Bankman-Fried, have destroyed both companies in a single week.
The loss in crypto market confidence from the FTX fiasco hit Bitcoin prices hard all week. But the price action in BTC was hardly an endless downward slide.
Bitcoin rallied Tuesday on initial reports that Binance would help bail out FTX, only to reverse again rather quickly and head lower. BTC bottomed on Wednesday afternoon and has rallied through Thursday morning.
Bitcoin volatility
Volatility and Bitcoin come hand in hand. According to Kraken Intelligence’s September 2022 Market Summary and Outlook Report, Bitcoin’s volatility rose from 52% in August to 64% in September, peaking at 74% on September 17.
On the other hand, according to the Kraken report, Ethereum’s volatility started the month significantly higher at 89%. Yet it fell to 78% by the end of the month, with a separate peak of 94% on September 17, just a few days after the “merger”.
The Ethereum merger is the platform’s transition from a proof of work network to a proof of stake network.
But even with this lower volatility, Bitcoin is still notorious for sudden jumps. Given that the financial climate remains extremely unpredictable, leaving investors on edge, there is no guarantee that what we are experiencing will remain, even if the worst of the past year does not return.
What Does Bitcoin’s Bounce Mean for Investors?
The big question facing investors is whether this is yet another sign that Bitcoin bottom is in or if the refuge is just a dead cat bounce – where prices temporarily rise in the middle of a long-term negative trend, only to resume the downward slide after that.
While the rebound has provided a welcome respite, the reality is that we are in unprecedented territory in terms of the geopolitical climate, rampant inflation and the Fed’s stance on interest rates.
Anyone familiar with the industry knows that even at the best of times, predicting the short-term price action of digital assets is nearly impossible. This is especially true in this market environment.
