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Why is the price of Bitcoin going up

Yesterday the price of Bitcoin soared 12% from $22,200 to $24,900 in fifteen hours. But why is it going up?

There are probably two dynamics that combined to generate yesterday’s strong rebound.

The medium-term trend: why is the price of bitcoin going up now?

First, since the beginning of January, a medium-term uptrend has been triggered that does not seem to have stopped yet.

It started on 9 January to be precise, which is just over a month ago, when it went from $16,900 to $17,200.

In fact, after the collapse due to the FTX bankruptcy in the first decade of November 2022, Bitcoin’s price had fallen to annual lows at $15,500.

It had then immediately climbed back above $16,000, but in December it failed no less than four attempts to get back above $17,000.

So 2022 closed below $17,000, but as of 9 January the post-collapse lateralization trend ended.

At that point, a seemingly medium-term uptrend was in fact triggered, thanks to which it not only never went back below $17,000, but also managed to rise first above $18,000 on 12 January and then above $20,000 on the 14th.

Since it had subsequently stayed around $21,000 for a little less than a week, many thought that this was not an uptrend, and that it was just a momentary rebound preparing for a return below $20,000.

Instead, on 20 January, with another bounce it also broke above $22,000.

Since then it has lateralized for several weeks around $23,000, so much so that once again many were convinced that it was not an uptrend over the medium term, but the long tail of the post-crash bounce.

What’s more, on 9 February, exactly one month after the start of this early 2023 uptrend, Bitcoin’s price fell back to well below $22,000. At that point, many were afraid that it might fall further.

The US inflation figure

This is where the second dynamic that may have played a role in yesterday’s jump takes over.

The drop on 9 February was probably related to fears that the January inflation data in the US were far higher than expected.

They were indeed higher due to the fact that expectations were for annual inflation at 6.2% or 6.3 %, while instead the figure released on Tuesday was 6.4%.

However, the drop in Bitcoin’s price on 9 February, followed by a few days of downward lateralization below $22,000, actually seemed a bit excessive. In other words, it seemed to suggest that markets were expecting a much worse figure than 6.3%.

It is worth mentioning that as soon as that figure was announced the price of Bitcoin fell, from $21,800 to $21,600, but given that the day before it had also fallen below $21,500 it was evident that this drop was very small indeed.

In other words, it is plausible to imagine that markets in recent days had become convinced that the real price situation in the US was worse than they had imagined, so much so that, for example, the Nasdaq 100 index between 9 and 10 February itself had lost 3.6%.

However, when the US stock exchanges opened, about an hour after the inflation figure was released, they did not fall. In fact, after a couple of hours of volatility they started to rise again.

The price of Bitcoin, on the other hand, began to rise again immediately as soon as the US exchanges reopened, so much so that it immediately returned above $22,000. At that point, it became clear that the fears of the previous days had been overstated, and that the inflation figure at 6.4% was not that far off from the 6.3% expected.

This dynamic led to a further rebound yesterday, with the price of Bitcoin returning to $22,800 before the US stock exchanges reopened, and then rocketing above $24,000 by mid-session.

Since it had already attempted to rise above $24,000 in early February, without succeeding, and since it fell in the following days, close to the day when the inflation figure was to be released, it is possible that yesterday’s was only the third attempt in February to rise above $24,000, but this time it succeeded.

It is also possible that in the past few days the brake may have been excessive fear regarding the US inflation figure for January.

Next step

Moreover, yesterday, on the momentum of the successful attempt to get back above $24,000, Bitcoin’s price also made a first attempt to assault $25,000, although it failed. It stopped at $24,900 and then fell almost immediately below $24,600.

At this time, it seems indeed that the next step could be to break above $25,000, which nevertheless appears to be a strong barrier to overcome.

It is thus possible that, in the event that there is not a reverse bounce that brings the price back below $24,000, it may take several attempts to break through the $25,000 wall, just as it was for the $24,000.

Nor can it be ruled out that in the event of several unsuccessful attempts to break through the $25,000 mark, Bitcoin’s price may experience a strong reverse bounce that could bring it back below $24,400.

What is certain by now is that since 9 January a medium-term uptrend has been triggered that could also continue above $25,000 in the coming days or weeks, but it is by no means possible to rule out the possibility that it could come to a halt sooner or later.

Marco Cavicchioli
Marco Cavicchioli
Born in 1975, Marco has been the first to talk about Bitcoin on YouTube in Italy. He founded ilBitcoin.news and the Facebook group" Bitcoin Italia (open and without scam) ".