Bitcoin's start to the new year is far from fortunate. After a relatively strong rally in 2021, the leading digital currency dipped, putting it on pace for its worst start to a year since the earliest days of the digital alternative to money.
Bitcoin slipped below $40,000 on Monday, hitting its lowest level since early August. Although the digital currency recovered, it still suffered huge losses in the first week of 2022. BTC was down nearly 13% from the level of $42,000 per token.
Bitcoin has slumped more than 40% since reaching an all-time high of almost $69,000 in early November..
According to some crypto analysts, the market is suffering losses as investors expect rising inflationary pressures to force the Federal Reserve to raise interest rates more aggressively than planned. Against this background, they reduce investment, expecting market liquidity to run dry due to US monetary policy tightening.
According to OANDA senior market analyst Edward Moya, bitcoin and ether fell sharply as Treasury yields soared on expectations that inflation would remain strong, prompting the Fed to resort to multiple rate hikes this year.
The Fed is planning to raise interest rates four times this year. The first rate hike is scheduled for March.
Despite the fact that digital currency investors are buying back bitcoin, some analysts expect the cryptocurrency to enter a phase of consolidation around the current levels in the near future.
However, market participants are still optimistic about bitcoin's long-term outlook.
Bloomberg Intelligence's Mike McGlone sees $30,000 as an important technical support level for the digital token. But this scenario is unlikely. The most likely scenario suggests that bitcoin will head towards $100,000 and ether will overcome the resistance level of $5,000. But he projects that bitcoin will eventually come out ahead. According to McGlone, the major problem is the Fed that is facing the highest inflation in four decades and is forced to raise interest rates.
