- Bitcoin (BTC-USD) is now approaching $50,000 per BTC token, a threshold level
- The total value of the cryptocurrency market is now reviving significantly as it is well over $2.1 trillion
- Bitcoin has weathered the inflation storm and war fairly well, helping to solidify its role as a store of value
Bitcoin (BTC-USD) is now approaching $50,000 per BTC token, a key threshold level. As of the close of business EST on Monday, March 28, the cryptocurrency was trading at $48,014. It has actually now slightly crossed over into positive territory year-to-date (YTD). This is because Bitcoin was at $47,686 on Dec. 31., around where BTC is today.
As a result, investors now consider $50,000 the next key trading for the crypto. If it is able to cross that trading level and maintain it, this may signal a return to a bull market for Bitcoin.
The last time the crypto was over $50,000 was on Dec. 7. This is after Bitcoin drifted down from making an all-time high of $67,566 on Nov. 7.
| BTC-USD | Bitcoin | $47,335.00 |
Why Bitcoin Is Higher
I suspect that one major reason for the rise in Bitcoin recently is the stalled war in Ukraine. The market may be forecasting the lines of a peace settlement sometime in the near future, as long as warfare does not intensify. In other words, the market may be anticipating that the worst period of Russian-Ukrainian warfare may be over.
In addition, the price of oil seems to be coming off of its high. As of late March 28, oil stood at $105.96, off 7% for the day. That also seems to be the result of a general perception that the global tensions might be easing, or at least the possibility of easing.
Moreover, certain key financial signals indicating a potential recession could be emerging. For example, Bloomberg reported on March 27 that the five-year Treasury bond yields were now above the 30-year yields. This is known as an “inverted” yield curve.
This means that shorter-term maturities in the Treasury bond market spectrum of investments or “curve” have been selling off faster. This pushes down their price and conversely pushes up their yields. The reason is simple, the coupon rate, say at 2% annually, now has a higher return if the price of the bonds to new investors is lower than before. But longer-term bonds don’t fall as much, so their yields don’t rise as much.
This is often seen as a sign of a possible or pending recession. However, it is not an exact science or indicator.
Where This Leaves Investors in BTC
Nevertheless, the possibility of a recession may be driving more investors to Bitcoin and alternative investments. That way they can gain an extra return or an alternative return.
It’s also a matter of liquidity. As more investments in the short-term bond market are sold, this provides more cash or liquidity that can be reinvested in investments such as Bitcoin.
Another major reason for the sudden increase in Bitcoin could be that short investors are scurrying to get out of their positions. They have to buy or “cover” their short positions in Bitcoin. That causes a temporary blip higher in the price that is being covered.
However, I think that investors in Bitcoin can take some comfort in that the crypto did not completely fall out of bed. Recently it has taken on the huge spike in oil, the Russia-Ukraine war, bought of higher inflation, and a withering stock market since the beginning of the year.
As a result, it might be a good time for investors to consider buying into Bitcoin and/or lowering the cost of their existing positions. After all, once BTC crypto crosses over $50,000 it may be seen as a new threshold point that points to a higher price for the rest of the year.
On the date of publication, Mark R. Hake did not hold (either directly or indirectly) any positions in the securities mentioned in this article.
