After a brutal few months, the price of Bitcoin (CCC:BTC-USD) is finally rebounding.
To be sure, BTC is still 36% below its all-time high of $68,789.62 reached last November, but the biggest cryptocurrency by market value is back above the key $40,000.00 threshold after rallying more than 10% in recent days, leading many cryptocurrency bulls to issue a collective sigh of relief.
At its current price of around $44,000, Bitcoin has mostly recovered to its position at the beginning of January, and rose above its 50-day moving average for the first time in more than two months. However, year-to-date, Bitcoin remains down 4%, leading some analysts to caution investors against getting too excited about the current rally. Yet many Bitcoin advocates believe the worst may be behind BTC after it appears to have bottomed below $35,000 per coin on Jan. 21.
Bitcoin Follows Tech’s Lead
Bitcoin and other top cryptocurrencies began to really rally after strong earnings from Amazon (NASDAQ:AMZN) were issued after the close of markets on Feb. 2. Amazon’s earnings and the subsequent rally in the company’s share price, which rose more than 10% on February 3rd, have bolstered confidence in technology stocks, which digital tokens have largely tracked over the past few months.
Ethereum (CCC:ETH-USD), the second largest cryptocurrency, has climbed as much as 14% since the beginning of February. The rebound in cryptocurrencies has been broad-based, with both large, established names and smaller, fledgling digital tokens jumping higher.
Prior to this latest gallop, cryptocurrencies had largely been trapped in a range over the last few weeks as earnings from big tech companies came in mixed. In January, cryptocurrencies experienced their biggest monthly selloff since 2018, with the price of BTC falling 28% peak to trough.
Cryptocurrencies’ struggle to break out came as growth stocks and other riskier assets faltered amid investor concerns about the impact of higher interest rates, tighter monetary policies, and amid threats of new regulations for the entire cryptocurrency sector. Skeptics pointed to the January selloff as evidence that a bubble in cryptocurrencies appeared to be bursting. But those cries now seem to have been premature.
Price Predictions and Growing Popularity
Bitcoin continues to be an extremely controversial investment, as does the entire cryptocurrency sphere. And as has been the case since its inception, price predictions concerning BTC are all over the map. The latest price predictions range from FSInsight forecasting that Bitcoin will reach $200,000 in this year’s second half to Parallax Digital predicting a $5 trillion market capitalization for Bitcoin within five to seven years (BTC’s current market cap is about $830 billion).
Others are not so bullish. Carol Alexander, professor of finance at the University of Sussex in England, says she expects Bitcoin to be worth about $10,000 by year’s end. Some skeptics are forecasting a cataclysmic crash in the coming months.
Yet despite all the prognostications, Bitcoin’s popularity and mainstream acceptance continues to grow. Audible gasps could be heard when accounting firm KPMG up north in Canada recently announced that it has added BTC to its corporate balance sheet, saying that Bitcoin is fast becoming a “maturing asset class.”
At the same time, electric vehicle maker Tesla (NASDAQ:TSLA) confirmed that it holds $2 billion worth of Bitcoin and that the volatility in the price of BTC over the past two months led the company to post a $101 million impairment loss as part of its most recent quarterly results. No matter. A growing number of corporations are hedging their bets and buying Bitcoin.
Wait for the Next Bitcoin Price Dip
Love it or hate it, Bitcoin does not appear to be going away anytime soon. And the current rebound in the price of BTC has only emboldened the bulls who see a brave new world in which cryptocurrencies and decentralized finance become the de facto way in which financial transactions are conducted. It seems almost foolish to recommend or not recommend Bitcoin.
People who are willing to accept the risks and stomach the volatility will buy the digital coin, and risk averse investors will avoid it. The best advice that can be provided at this point is to recommend that investors wait until the next dip before buying BTC. To say anything else would be like shouting into the wind.
On the date of publication, Joel Baglole did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.
