Why is bitcoin going up this month?

ALBAWABA - As the bulls of bitcoin, the first decentralized digital currency, are attempting to continue canceling FTX’s losses by breaking through the overhead resistance at $21,480, the bears are not about to budge.

The price of bitcoin can be affected by a variety of factors, including market sentiment, regulatory developments, investment demand, and global economic conditions. 

Understanding these factors can help you comprehend why the price of bitcoin is fluctuating.

In this article, we'll take a closer look at some of the possible reasons that might have contributed to the current changes in the price of bitcoin today.

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Whether you're a seasoned crypto investor, or just starting to explore this exciting new asset class, this article will provide you with valuable insights and information to help you make informed investment decisions.

• Regulatory developments

Changes in laws or regulations related to cryptocurrencies can also impact the price of bitcoin. For example, if a government announces plans to crack down on cryptocurrency trading, the price of bitcoin may drop. Similarly, if a country introduces regulations that make it easier for people to buy and sell bitcoin, this could boost demand for the cryptocurrency and drive up its price. 

According to market analysts, the long-term outlook for Bitcoin is positive. Additionally, investors may have more faith in the crypto market as they anticipate that the Federal Reserve will gradually raise interest rates in 2023, as indicated by the Consumer Price Index report.

• Lower Interest Rates Could Boost Crypto Market Recovery

^{Source: https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html} 

According to CME Group, a company that offers derivatives and tracks interest rates, there is a likelihood that interest rate increases will be smaller than expected in the near future. This is supported by a graph that suggests a slowdown in interest rate hikes. Many investors have confidence that future rates may decrease, which they believe could lead to a recovery in the overall crypto market.

• Cooling US Dollar A Positive Sign for Bitcoin

^{Source: TradingView}

Another positive sign for Bitcoin is the cooling U.S. dollar index (DXY). Historically when the DXY retracts, sentiment for risk assets like Bitcoin increases. As the dollar weakens, it makes Bitcoin and other cryptos more attractive to investors, which can help drive the price of Bitcoin up.

• Investment demand

The price of bitcoin can be affected by changes in investment demand. When more investors are buying bitcoin, the price tends to rise. For example, if a large institutional investor announces plans to buy a significant amount of bitcoin, this could drive up the price. On the other hand, if more investors are selling, the price tends to fall. 

On-chain analytics firm Glassnode says in its latest report: “With an explosive 23.3 percent rally to start off the year, a wide cross-section of Bitcoin investors (and miners) have seen their net holdings (and operations) return to a profit. This reflects the impact of both strong price appreciation, but also the tremendous volume of coins that changed hands over recent months, resetting their cost basis lower:”

• Economic conditions

 The price of bitcoin can also be affected by global economic conditions. For example, if there is a lot of uncertainty or instability in the global economy, investors may turn to bitcoin as a safe haven asset. This could drive up the price of bitcoin. Conversely, if the global economy is stable and growing, investors may be less interested in btc as a safe haven and the price may fall.

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A change in sentiment regarding the strength of the btc price may be "too much, too soon" according to the time-tested yardstick, the Crypto Fear & Greed Index. It’s worth noting that the crypto market spent the majority of 2022 in the lowest "extreme fear" category.

• Difficulty reaches a new record level

If Bitcoin's price rise wasn't enough to thrill investors, the network fundamentals also provide a positive outlook.

^{Source: Cointelegraph}

Network mining difficulty saw its greatest spike since October 2022, rising by almost 10 percent, roughly in time with the weekly closing.

Miners have already slowed the pace of their BTC reserve sales in recent weeks, according to Cointelegraph. At the same time, the difficulty increase reflects the return of competition for block subsidies to the sector.

• Supply and demand

 The most basic reason for the changes in price, if there's more demand for a product than there is supply, the price will go up, and vice versa. For example, if there is a sudden spike in demand for bitcoin, but the supply is limited, the price will go up. Conversely, if there is a sudden decrease in demand for btc but the supply is not limited, the price will go down.

Again, it's important to note that the cryptocurrency market is highly volatile and the price of btc can change rapidly. These are just a few possible factors that could be impacting the price, but it's always best to conduct your own research and consult with a financial advisor before making any investment decisions.