Bitcoin reaches $20,000 again, leading a widespread increase in cryptocurrency values

BY WOM

January 14, 2023

Summary

Bitcoin reaches above $20,000 for the first time since November 2021.
Crypto market as a whole is also seeing positive trend.
Experts have differing opinions on the reason for the rally.

Bitcoin, the largest cryptocurrency by market capitalization, is experiencing a surge in value as it reaches above $20,000 for the first time since the FTX collapse in early November. The crypto began the year near the $17,000 mark and has seen a gain of more than 20% in the opening two weeks of 2023. Despite this increase, it is still considered to be near the low end of a bear market that saw it reach a high of $65,000 in November 2021.

The crypto market as a whole is also seeing a positive trend, with ether (ETH) rising more than 20% year-to-date and threatening $1,500 for the first time since early November. The CoinDesk Market Index (CMI) also rose 14% for the week.

Crypto-related stocks also benefited from the rally this week, with exchange Coinbase (COIN) up 39% and bitcoin miner Marathon Digital Holdings (MARA) surging 76%. Traditional markets also saw positive gains, with the S&P 500 gaining more than 2% as Q4 earnings season began and as U.S. inflation numbers - though remaining elevated – continued to move lower.

Experts have different opinions on why this rally is taking place. Craig Erlam, senior market analyst at foreign exchange market maker Oanda, suggests that $20,000 “once [was] deemed a disturbing low but now potentially represents a sign of a revival”. Nicholas Colas, co-founder of the market analysis firm DataTrek Research, believes that while the U.S. Federal Reserve's policy still matters, "other issues like China’s reopening, the pace of US economic and corporate earnings growth, and positive real rates will jostle for investors’ attention."

Despite the positive trend, it's important to note that the crypto market is known for its volatility, and the future of Bitcoin and other cryptocurrencies is uncertain. As Colas said, "None of this guarantees that 2023 will be a good year for risk assets, but it does say it will look a lot more normal' than last year."