In January, Bitcoin managed to fight off a sell-off that sent prices to below $35,000. In the last week, the cryptocurrency trended higher. Nasdaq’s volatile but weekly flat return helped. Bitcoin’s short-term fluctuations will depend on the market’s volatility.
Leveraged stock investors need to raise cash by selling bitcoin. When the market falls, those investors have to have more cash to continue holding their long positions. If stock markets stabilize, bitcoin investors may decide to sell instead. It makes little sense to have exposure to the volatility of both bitcoin and stocks.
Bitcoin investors need to consider holding their positions for the longer term. The global markets are still high on fiat currency liquidity. This devalues money and increases the attractiveness of bitcoin.
The five-year chart would indicate that early cryptocurrency investors are still in a profitable position. Bitcoin traded in the $5,000 – $8,000 range before 2009. In 2020, the pandemic distorted the value of bitcoin. The government handed out stimulus checks, decreasing the value of the dollar.
The Federal Reserve kept interest rates low at that time. Its aggressive rate-hiking plans may strengthen the value of the U.S. dollar. Investors should speculate that the Fed would not raise rates by more than 25 basis points to start. That small rate hike would send Bitcoin higher.