To Buy or Not to Buy Bitcoin? That Is the Question
Due to the unprecedented situation, no one is certain whether Bitcoin will be able to pass the litmus test of increasing interest rates and inflation.
Some experts have offered their opinions on the so-called “crypto winter” which has brought the markets to their knees.
Bitcoin (BTC), and indeed all risk assets including crypto mining and tech stocks, has been in free-fall since last week, after the Federal Reserve announced a 50 basis point interest rate hike.
Recession fears, coupled with rising interest rates, have caused financial markets to tumble. As such, a Hamletian dilemma has arisen for traders who find themselves unsure whether to buy or not to buy the Bitcoin dip. In the midst of this crisis, uncertainty reigns for the future of investments into this and other crypto assets.
The crypto winter is an unprecedented situation for digital assets, which did not yet exist in the crisis of 2008. It is also believed that Bitcoin failed to gather enough strength in the wake of previous Fed adjustments that were made between the years 2016 and 2019.
On this occasion, the aggressive measures undertaken by the U.S. central bank to contain inflation may see rates rise above 3% by early 2023, according to market analyst forecasts.
BTC Has No Experience in Financial Crises
The level of risk for crypto investors is at an extreme high. With Bitcoin lacking experience in dealing with financial crises or high interest rates, it is quite risky to buy the dip, experts say.
The price of Bitcoin has been in free-fall since last week. As of Wednesday at 9:03 am (ET), the leading asset was even trading as low as $29,279, according to CoinMarketCap, the lowest level seen since July last year.
“This isn’t the first time that we’ve reached this level, and the risk-reward ratio for picking up bitcoin here has been very good in the past year or so, but we are seeing a different macro backdrop,” underlined Matt Dibb, COO of Singapore-based crypto platform Stack Funds.
However, he specified that “the concern is this time is different with respect to whether we will see continued weak sentiment in traditional financial markets, which is likely given the inflation outlook and the likelihood of increased rates in the next few months or years”.
“The era of free money is over”
The market continues to expect further interest rate hikes in June and July of another 50 bps. It is not even ruled out that another increase will take place in September.
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