After a turbulent year, Bitcoin and Ethereum prices are rising. However, some experts are still not ready to say that investors are convinced by the recent price fluctuations.
The two largest cryptocurrencies are still down more than 50% from their all-time highs late last year. Still, in typical fashion, the crypto market rebounded sharply in July, with the price of Bitcoin up more than 30% and Ethereum up 70% since the market collapse in June. Could this signal to investors that Bitcoin and Ethereum have already passed this cycle’s lowest price points?
On Wednesday, Bitcoin was near $24,000 and Ethereum surged above $1,800 after the release of the new inflation data. Inflation eased somewhat in July from historically high levels, which in turn led to a rally in stock and crypto markets. Ethereum price has skyrocketed by 8% and Bitcoin price by almost 4% in the last 24 hours.
However, some experts are still skeptical about what the recent price jumps could mean in the long term.
“In fact, the Fed is still tightening and inflation is still high, so we cannot be convinced of a market reversal at this time,” said Marcus Sotiriou, market analyst at digital asset broker GlobalBlock. “But the fact that [Fed Chairman] Jerome Powell has started to say that the rate hikes are having a noticeable impact on me, signaling to me that we are in the later stages of this bear market, which we’ve been in for about eight months.”
Have Bitcoin and Ethereum Prices Hit a Bottom?
Bitcoin and Ethereum have been gaining positive momentum for the past few weeks. While the surge in Bitcoin and Ethereum prices has been impressive, crypto’s pegging to the stock market could be a sign of future volatility.
The stock market had its best performance since 2020 in July and continues to post gains in August, making it arguable that crypto is currently benefiting from the stock rally, says Scott Sheridan, CEO of brokerage firm Tastyworks. If stocks falter again, crypto is likely to follow.
“I think if you see the market giving up some of the recent gains, you’ll likely see something similar in crypto,” Sheridan says.
Crypto educator and market analyst Wendy O is also not convinced that Bitcoin and Ethereum are yet to reach their lowest prices this cycle. O says the market “will see real capitulation later in the bear market,” which she thinks will continue for a year or two. Capitulation is the moment when investors lose all confidence in the price outlook, even after it has collapsed. These images show what the capitulation for Bitcoin and Ethereum could look like next year, according to O.
While crypto prices cannot be predicted with certainty, O say the signs suggest Bitcoin and Ethereum will revisit their June lows of $17,500 and $900. And the ongoing economic and political uncertainty could add even more volatility to the market in the coming weeks or months.
“In previous bear cycles, both cryptos have corrected by 85%,” says O. “I expect Bitcoin to hit $10,000 and Ethereum to $750.”
What Crypto Investors Should Do Amid Continued Volatility
The only thing guaranteed when it comes to crypto investing is volatility. Almost a year ago, the price of bitcoin surged to $68,000 and it has now fallen back below $25,000.
These ongoing swings are a good reminder that not everyone has a risk tolerance for crypto. If you are curious about crypto, remember that investing in crypto is extremely risky and you should only allocate 5% of your investment portfolio to crypto assets. Even then, only do this if you have a high risk appetite. There is no guarantee that you will win money – or even get back the money you have invested in the crypto market.
Invest only what you would lose and only when your other financial priorities are right – such as
Bitcoin and Ethereum’s swings so far this year demonstrate the extreme volatility that crypto investors are facing. If you’re interested in investing in crypto, or already have some money invested in Bitcoin, experts recommend not panicking in the face of short-term volatility and instead focus on long-term growth potential.