Will the Bitcoin price rise or fall as the Fed hikes interest rates and tensions between Russia and Ukraine escalate?

Bitcoin price is currently down about 10% year-to-date and down about 38% from last November’s record high…

Illustration – Photo: Getty/CNBC.

Bitcoin price could be put to the test this week as global investors monitor tense developments between Russia and Ukraine as they continue to assess the possibility that the US Federal Reserve (Fed) will cut interest rates around 0.00% at the March meeting .5 percentage points.

Bitcoin – the world’s largest digital currency – has long been viewed by investors as a safe haven asset that can balance portfolio risk and limit the impact of adverse market shocks. However, over the past several months, bitcoin’s price action has acted more like stock price action, particularly for high-growth stocks that carry higher risk than the broader market. This is because rising interest rates are worrying investors, leading to a reduction in capital allocations to tech stocks and other riskier assets.

“Bitcoin is a currency that is not owned by any single country and has performed very well in times of geopolitical tensions in the past. Therefore, some investors will need to buy Bitcoin in search of safety,” said analyst Yuya Hasegawa of Japan’s virtual currency exchange Bitbank.

Despite this, “changes in the market landscape have made Bitcoin more vulnerable to US stock market volatility. Therefore, Bitcoin investors may not feel comfortable until the situation on the Russian-Ukrainian border calms down,” Hasegawa added.

Bitcoin price is currently down about 10% year-to-date and about 38% below the record high set in November last year. As of more than 5:00 p.m. on February 15 Vietnam time, according to data from Coinmarketcap.com, the bitcoin price was $44,054, up 4.6% compared to the time 24 hours ago.

Given the rising interest rate environment, tech stocks and other tech stocks could come under severe downward pressure for some time. That said, if this is a “crypto winter” (a term for an extended period of bear prices), it could last several months.

“When cryptocurrencies are in a bear market, bitcoin price will move sideways or down for another 8-9 months. This is an opportunity for short-term investors to exit the market and real investors continue to work together to develop this technology,” said Chris King, CEO of Talk to Eaglebrook Advisors.

Bitcoin price movement in the last 3 months. Unit: USD/Bitcoin.

Katie Stockton, founder of Fairlead Strategies, says Bitcoin is facing resistance at 46,730 U.S. dollar and that resistance will continue this week. Bitcoin support is 37,360 U.S. dollarbut that mark seems difficult to penetrate in the short term.

Seasoned cryptocurrency investors have seen many of Bitcoin’s “terrible” swings and aren’t worried about the long stretches of market depression. Bitcoin has only been in the “virtual currency winter” state once before. That was in 2018 when Bitcoin price fell 80% from its peak. Since then, the virtual currency market in general, and bitcoin in particular, has grown to a new level.

The biggest bear markets are when the crypto industry is cleaning up and building the infrastructure and applications to make it easier for the next wave of investors during the next bull market. In today’s virtual currency world, besides bitcoin and other digital currencies, there are many new things like decentralized finance (DeFi), NFT, metaverse virtual universe…

“Virtual currency applications are flourishing. We have only scratched the surface of the blockchain world,” said Rodrigo Vicuna, Chief Financial Officer (CFO) of Prime Trust.

For example, interest and investment in NFTs has exploded in 2021. Most people still see NFTs as digitized works of art – a concept many find elusive – without realizing other potential NFTs. For example, a home’s NFT could provide a home’s ownership history, or medical records NFT could provide patients with a secure way to share information with doctors, he said.

Mr. King noted that while DeFi is attracting a lot of interest, it is still in its infancy and at a low stage of development. DeFi allows users to make loans and other financial activities over the blockchain without the need for an intermediary.

“DeFi remains a highly speculative sector. The infrastructure is still under construction, the technology is still cumbersome and difficult to use,” said King. “Like 2013-2016, bitcoin has been difficult to buy, but companies like Coinbase and Gemini have made it easier. DeFi also needs such companies to enhance and reduce speculation. This will need time.”

As Bitcoin’s price cycle lengthens and profitability falls, these other assets are playing a big role in attracting new investors and new businesses to the digital asset sector and increasing applications in the space. Bitcoin does not yet have a sharp application, but increasing adoption will lead to such an application, according to King.

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