A recent surge in the prices of cryptocurrencies such as Bitcoin and Ethereum has provoked a distantly familiar debate: whether a market rally may be imminent or whether recent trends are just a prelude to more pain.
Since Bitcoin hit an all-time high of around $69,000 in November 2021, the digital asset has been awash in higher interest rates and a series of high-profile collapses — firms like Three Arrows Capital (3AC) and FTX, to name a few.
While Bitcoin is down almost 67% from its peak, digital assets – and other investments like stocks – have had a positive start to the year. The price of Bitcoin has risen 38% so far this month to $22,858, the highest price since last August. Ethereum, meanwhile, has seen the value of ETH rise around 38% as well to $1,645, according to CoinGecko.
Cryptocurrency prices began rising earlier this month in anticipation of an economic report that showed inflation cooling in December. The reading also raised hopes that the Federal Reserve will raise interest rates less aggressively than they have done in the past year to curb rising prices.
But be tired, says the cautious one. Many crypto commentators believe the latest rally in prices is too good to be true, labeling the rally a bull trap and predicting that the breakout will crash and burn traders who assumed it was the start of a new uptrend.
Others who follow the rally are also skeptical. A Twitter survey conducted by a popular Bitcoin site reached a consensus among over 18,000 participants that the rally was actually a bull trap on 15 January.
More recently, “il Capo Of Crypto,” a prominent influencer and self-proclaimed cryptoanalyst, agreed with the bearish stance, saying the rally “looks clearly manipulated” and is the “biggest bull trap” they’ve ever seen.
The sentiment among cautious crypto enthusiasts was echoed on Reddit, where a user pushed back against observations supporting a market bottom made in a news article.
“Hard to believe that it was only a week or so ago that everyone and their analyst was solemnly and confidently proclaiming that [Bitcoin at] 12k was inevitable and unavoidable,” the user stated.
And of course there’s Jim Cramer. The host of MSNBC Crazy money tweeted Wednesday that the recent rebuttal is “manipulation” and further evidence that digital assets are a “wet market.”
The mixed accuracy of Cramer’s comments has long been the subject of ridicule, leading to numerous memes and the popularity of accounts such as “Inverse Cramer ETF,” a fictitious Exchange-Traded Fund that recommends the opposite of Cramer’s advice.
In response to Cramer’s claim on Wednesday, several accounts took the host’s pessimism as a positive sign, such as Dan Held, head of growth marketing at crypto exchange Kraken, who responded: “The bottom is in!”
Other influential accounts on Twitter were genuinely bullish, such as “PlanB,” who declared a new bull market for digital assets had begun as Bitcoin’s recent pump took hold. Some community members took it as an opportunity to harp on those who believe digital assets will suffer more losses.
The rise in prices has also left a few on Wall Street scratching their heads.
A research report published on Friday by JP Morgan analysts could not explain the rise in crypto prices with confidence, but acknowledged that market conditions for riskier assets have grown more favorable, citing the recent inflation report.
“We don’t have a good answer to the January rally to date, but we think it’s symbolic of the underlying conviction many still have in cryptocurrencies,” it said. “The crypto bulls and whales seem to have been revived.”
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