Bitcoin: A High-Risk Investment Amidst Inflation and Recession

Key Insights

• Bitcoin price hits all-time highs and reversed lower to hit strong support at $17,000.
• Efforts by the Federal Reserve to combat inflation by increasing interest rates are ineffective.
• Bitcoin faces significant resistance at $28,000.

Bitcoin is a decentralized digital currency that allows for peer-to-peer transactions without the need for a central authority. It was created in 2009 by an individual or group of individuals using the pseudonym Satoshi Nakamoto.

Bitcoin is often considered an alternative investment, and its price can be highly volatile. Despite this, many individuals and institutions have invested in it as a hedge against traditional markets and as a way to gain exposure to the growing cryptocurrency market. However, it’s important to note that investing in Bitcoin is considered a high-risk investment and should be approached with caution.

Due to the current economic downturn and rising inflation, as well as the growing acceptance and awareness of Bitcoin in various regions, the general public’s interest and curiosity in Bitcoin have increased, resulting in an increase in demand and a price that surpassed $64,000 in 2021. Bitcoin’s attempt to reach $64,000 failed, and the price reversed in a few months to reach strong support at $17,000.

How Bitcoin Acts During Recession

Inflation has surpassed the 40-year record and will reach its peak in 2022. The Federal Reserve’s efforts to increase interest rates above 4% have caused the CPI to correct to 6.42%. However, inflation remains extremely high and out of control. The negative yield curve below zero also suggests that a recession may occur in 2023.

During a recession, the price of Bitcoin and other cryptocurrencies can be affected by a variety of factors, such as changes in investor sentiment, government regulations, and overall market conditions. In some cases, the price of Bitcoin may drop as investors flock to more traditional safe-haven assets, such as gold or government bonds. Although, in other cases, the price of Bitcoin may rise as investors see it as a hedge against inflation or a way to store value outside of traditional financial systems. Overall, the relationship between Bitcoin and recessions is complex and can vary depending on the specific circumstances.

Since the US dollar has already reached the strong technical target on the long-term chart and is expected to decline, Bitcoin’s value is expected to rise. Since Bitcoin is not held by the government, there is no direct correlation between it and inflation. However, Bitcoin in the relative currency is affected by the strength or weakness of the relative currency.

Technical Picture of Bitcoin

The chart below depicts the monthly market levels for Bitcoin, which suggests volatile price action. The chart depicts a double top that was broken at $28,000. As soon as the neckline is broken, the price reaches $17,000, also known as the strong support.

Bitcoin is currently bouncing off a region of strong support, and immediate resistance is located at $28,000. Any breach of $28,000 will signal a breakout and lead to a search for higher prices. However, a breakout from $17,000 would indicate a strong breakdown, and one should anticipate a decline to $13,500 and $3,500.

Bottom Line

In conclusion, higher inflation may have a positive effect on Bitcoin, but there is currently no direct relationship between inflation and Bitcoin. However, the price of Bitcoin may rise due to the United States’ economic weakness, and some investors may view Bitcoin as a hedge against inflation, which may impact demand.

In other words, inflation can affect the value of a currency and the economy, which may affect Bitcoin demand. Currently, the likelihood of a recession in 2023 is increasing. Bitcoin is rising from the strong support level of $17,000 towards the immediate resistance level of $28,000, which will act as a strong resistance. A breach of $28,000 is required for Bitcoin prices to resume the uptrend.