Another Red Daily Close Puts Bitcoin Below $23,000, Is Recovery Expected?
Bitcoin has seen another red daily close after a huge rally from last week. This has now wiped out most of the gains made during this time period and has left the digital asset struggling below $23,000 again. The momentum has quickly died down as news of the recession set in. Its viability as an inflation hedge is once again being called into question given its performance so far this year.
Is Bitcoin still a good bet?
Bitcoin being an inflation hedge has been one of the selling points for the digital asset. This is due to year-over-year performance compared to other financial markets over similar time frames. Since these financial markets, like the stock market, have not been able to keep up with the high rate of inflation, investors had naturally flocked to bitcoin as annual returns trumped inflation rates.
That is, until a bear market where bitcoin’s performance as an inflation hedge begins to falter. An example is the bear market currently being experienced in the market. This decline has seen the digital asset lose approximately 44% of its value over this time, and inflation continues to reach 40-year highs. But on a monthly basis, bitcoin has outperformed prominent markets like the S&P, lending credence to its ability to provide reasonable returns even during a bear market.
BTC sees another red daily close | Source: BTCUSD on TradingView.com
Bitcoin is up more than 20% in the past month, while the S&P is only up 8%. However, on an annual basis, the market is down significantly less than bitcoin at 5.8%. So while bitcoin has proven to be a good bet when it comes to hedging against inflation, it is still a choice for investors with a high appetite for risk.
Market sentiment points to recovery
The crypto market crash back in June had sent market sentiment deep into the extreme fear zone. This would persist for a couple of weeks as cryptocurrency prices struggled to recover their lost value. However, that would quickly change when bitcoin saw a rapid recovery in price back in July.
Bitcoin had returned to over $24,000 again and this had once again instilled faith in the hearts of investors. Sentiment had recovered along with the price and by the end of the month had grown to a high score just below 30 on the Fear & Greed Index. This score still placed it in fear territory, but was a notable improvement in sentiment nonetheless.
Now, even with the slowdown, data shows that investors still maintain a positive sentiment towards digital assets like bitcoin. One thing that positive emotions drive is accumulation, and accumulation leads to recovery. Bitcoin only needs to hold above the $22,700 support and close with a higher price for a return above $23,000.
Featured image from Outlook India, chart from TradingView.com
follow Best Owie on Twitter for market insights, updates and the occasional funny tweet…
