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Still down more than 34% this year, investors are anxiously trying to find a bottom in what has been a long and difficult year for cryptocurrencies.
As inflation has surged and the Federal Reserve has guided for fast and aggressive hikes to its federal funds rate, the overnight rate at which banks borrow from one another, cryptocurrencies have sold off like other growth stocks.
Additionally, the Fed has started the daunting task of shrinking its $9 trillion balance sheet in a process known as quantitative tightening by reducing the amount of bonds it holds on its balance sheet.
A possible explanation for Bitcoin’s run today is that the Chinese government is lifting restrictions in major cities that were put into place after the country saw a resurgence of COVID-19 cases earlier this year.
At this point, I have no clue whether Bitcoin has bottomed and would not recommend ever trying to predict or forecast a market bottom or top.
This will have the effect of making safer assets yield more and pulling liquidity out of the economy, both of which could hurt the allure of Bitcoin and send its price lower.
But long-term, I fully expect Bitcoin and at least several other cryptocurrencies to be around and generate good value.