"Cryptocurrency will become a refuge from inflation." Why bitcoin has risen in price

The cryptocurrency market continues to recover, with digital assets renewing their local highs. Experts explained what this is about and what investors should prepare for

"Cryptocurrency will become a refuge from inflation." Why bitcoin has risen in price

On Tuesday, March 22 cryptocurrencies rose in price. In particular, bitcoin rose by 5% to $42.9 thousand, Ethereum rate rose by 3% to $3 thousand, Binance Coin went up by the same amount to $408. The total capitalization of the market increased by 3% to $2 trillion.

The main reason for the growth now is the interest rate hike in the U.S., as well as investors’ expectations that the Fed will accelerate its key rate hike to fight inflation risks and that the statistics on consumer price growth shows the inflation rate will remain at a high level. In such an environment, market participants are redirecting some funds into protective assets to keep them out of inflation – gold, government bonds, and, more recently, bitcoin, which has proven to be a worthwhile tool in fighting inflation risks.

“However, I do not expect further rapid growth of the crypto market, and the reasons are the same – an increase in the key rate in the U.S. makes treasury securities an attractive asset (the key rate increases → the yield of government bonds increases). Therefore, on the one hand, high inflation contributes to the flow of investments into cryptocurrencies, on the other hand, this flow goes not only to gold/digital gold, but also to government bonds, which again become a profitable investment because of the key rate increase.

He considers that in the nearest weeks bitcoin will continue to fluctuate in the former range of $37-45 thousand. At that the expert reminded that in the nearest time Ethereum will have important updates which can lead to 2-3 times growth of altcoin rate.

In 2022, the main Ethereum network is expected to dock or merge with the Beacon Chain. This will mean the end of cryptocurrency mining and the transition to more energy-efficient stacking. Stacking is not powered by computing devices. The blockchain is made operational by cryptocurrency owners who stack the cryptocurrency in a special smart contract. For this, they receive rewards proportional to their contribution.

Artem Deyev, head of the analytical department of AMarkets, also expects bitcoin prices to fluctuate near the $40,000 level in the coming days. He argues that there are no fundamental factors for serious growth of cryptocurrencies (as well as stock exchanges) at the moment. And there are plenty of pressure factors – the tightening of the Federal Reserve policy, geopolitical instability, increasing inflationary trends in the world.

“However, the latter factor may attract even more investors to cryptocurrencies, which will occasionally stimulate its growth. But the time has not come for breakthrough bitcoin – the rate will remain in the corridor of $35-45 thousand for a long time,” – said the expert.

Bitcoin has passed through the stage of accumulation, which gives the first impulses, CEO of Cryptorg Andrey Podolyan added. Then he called $45-45.5 thousand an important level, and in case of their breakdown one should wait for reaching $51-52 thousand that will lead to the growth of Ethereum and Binance Coin by 10-30% more. He called the market positive at the moment.

For the resumption of bitcoin rally it is necessary to close the week above $46 thousand, for Ethereum – above $3.3 thousand. In case of break through these marks, we should expect the growth of bitcoin rate to $47.5 thousand and $52.5 thousand, and Ethereum – to $3.5 thousand and $3.9 thousand.

There is a possibility that due to rising inflation, the link between cryptocurrency and U.S. stock indexes will weaken, Antonov added. According to him, cryptocurrency may become a refuge from high inflation around the world.

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