Bitcoin (BTC) could be in for a significant price increase, if past trends are any indication. The leading cryptocurrency by market value has seen a 40% increase to $23,000 this month, according to CoinDesk data. This rally follows a year-long slump that resulted in a 68% drop in price, and prolonged consolidation at the depths of the bear market around $18,000. This upswing parallels the bull revival of mid-2019, which saw the price surge by almost 250%.
The recent rally is also taking place as the U.S. Federal Reserve nears the end of its liquidity-tightening cycle, which has had an impact on risky assets, including cryptocurrencies. The conditions are similar to those that preceded bitcoin’s bull revival in the second quarter of 2019, when the price surged 247% to $13,800 as the Fed’s tightening cycle peaked.
The Fed’s previous tightening cycle lasted three years, starting in December 2015 and ending December 2018, and lifted the central bank’s benchmark borrowing rate to the 2.25%-2.5% range. Last year, the Fed raised the benchmark borrowing rate from 0% to 4.25%. The market now expects the Fed to slow the pace of rate increases to 25 basis points in February and March.
Bitcoin’s market action since July looks similar to the moves witnessed from late November 2018 to early April 2019. Bitcoin’s fourth reward halving, a programmed code reducing the pace of supply expansion by 50% every four years, is due to occur in March or April.
Overall, while the conditions may be similar to those that preceded the bull revival of 2019, it’s important to note that the cryptocurrency market is highly volatile and past performance is not necessarily indicative of future results. However, the current rally does indicate that the market is responding positively to the Fed’s monetary policy and the upcoming mining reward halving, which could lead to further gains for bitcoin.
